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Episode 260: Prof. James Choi: Practical Finance

The Rational Reminder Podcast

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The Impact of the Rare Disaster Theory on Portfolio Shares

The Rare Disaster Theory has been kicking around academic finance for a while. It says that people are concerned about these once and every 100 years disasters. And by the way, you just compute the historical average return and risk to the stock market. Well, rare disasters being rare, you just don't see in the historical data the rare disaster having happened.

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