High expected returns are attractive but are associated with high risk. Ultimately, risk shows up as volatility. Volatility is a fundamental feature of a business but can be increased through firm or investor leverage. Volatility without leverage significantly reduces long term return. Leverage...

There has been considerable finger pointing since the Crash of 1987, much of it devoted to the tail wagging the dog idea. This concept may be typical of many that will influence regulators and exchanges as they decide what new measures to adopt to prevent another Crash. It is wrong, and it...

The principles of behavioral psychology can explain how crashes occur. In particular, the concept of "stimulus generalization" tells us that organisms tend to respond in the same way to similar stimuli. In a crash, or pre-crash, context, several stimuli - including rising prices, above-average...