Law of Averages
Law of Averages
There is another explanation of the low average returns on stocks of low quality and great variability. These stocks may represent a kind of lottery ticket to many investors who are willing to accept lower expected returns than they would accept for stocks of higher quality in order to have some chance of very large gain. A person who buys a lottery ticket accepts negative expected returns in order to have some possibility of extremely great rates of return—say,
