I wouldn’t say “for him”; he advises people to choose a low beta portfolio, but yes, in the model he uses to explain the data investing in the market portfolio is risk free.
I would say ‘for him’ because ‘Falkenstein risk-free’ <> ‘risk-free’ as is commonly used. (For example, anyone invested in the whole market the last few years knows that it’s not risk-free in the literal or commonly used sense.) As a result, ‘Falkenstein risk premium’ <> ‘risk premium’ as commonly used.
I think if he had used a different term, like baseline or benchmark for example (instead of recycling/ humptifying the existing term ‘risk free’) his article would be clearer.
Falkenstein violates the second of what I think of as the Two Commandments of Research:
If a name for a concept exists in the literature, you use it; you don’t create your own name for a concept that’s already in currency. If your concept is one-off (i.e., related, but somehow different) from an existing concept, it’s best to coin a term which is a modification of the current term.
Thou shalt never clobber an existing term by giving it a new meaning different from its existing meaning. Ever.
I wouldn’t say “for him”; he advises people to choose a low beta portfolio, but yes, in the model he uses to explain the data investing in the market portfolio is risk free.
I would say ‘for him’ because ‘Falkenstein risk-free’ <> ‘risk-free’ as is commonly used. (For example, anyone invested in the whole market the last few years knows that it’s not risk-free in the literal or commonly used sense.) As a result, ‘Falkenstein risk premium’ <> ‘risk premium’ as commonly used. I think if he had used a different term, like baseline or benchmark for example (instead of recycling/ humptifying the existing term ‘risk free’) his article would be clearer.
Falkenstein violates the second of what I think of as the Two Commandments of Research:
If a name for a concept exists in the literature, you use it; you don’t create your own name for a concept that’s already in currency. If your concept is one-off (i.e., related, but somehow different) from an existing concept, it’s best to coin a term which is a modification of the current term.
Thou shalt never clobber an existing term by giving it a new meaning different from its existing meaning. Ever.
Should you still call a triangle a triangle if you’re drawing it on a curved surface?
(You’re right in general, though.)
I suppose extending is a case of “giving it a new meaning different from its existing meaning”, but it isn’t clobbering.