Quant Radio: Fear, Not Risk, Explains Asset Pricing

For decades, the prevailing wisdom in finance has told us that higher risk equals higher reward. But what if that model is missing the most powerful driver of asset prices—human emotion?

In this thought-provoking episode of Quant Radio, we explore the groundbreaking ideas of Robert D. Arnott and Edward F. McQuarrie, who argue that fear—not risk—is the real force shaping the markets.

Drawing on historical data and behavioral insights, they challenge traditional models like CAPM and introduce their "Deranged Asset Pricing Model" (DAPM), which places investor psychology, especially fear of loss and fear of missing out (FOMO), at the heart of market movements. From meme stocks to bond yields, and even long-term equity underperformance, this episode offers a fresh, emotionally intelligent lens on why markets behave the way they do. Whether you're an investor, economist, or just curious about the inner workings of the financial world, this discussion will change the way you think about risk—and fear.

Find the full research paper here: https://community.quantopian.com/c/community-forums/fear-not-risk-explains-asset-pricing-quantpedia

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Quant Radio is an AI-generated podcast, intended to help people develop their knowledge and skills in Quant finance. This podcast is not intended to provide investment advice.