EMH doesn’t mean that you cannot deliberately contrive to lose money.
Under EMH is pretty hard to deliberately and consistently lose money. It’s very easy to get additional risk (e.g. by not diversifying), but I don’t think EMH envisions assets with negative expected return.
Mm, the way I remembered was that by not diversifying, you were taking on additional uncompensated risk; not diversifying wasn’t completely neutral, expected-value wise. (Also, there’s obvious ways to guarantee losing money: trade a lot. The fees will kill you.)
Under EMH is pretty hard to deliberately and consistently lose money. It’s very easy to get additional risk (e.g. by not diversifying), but I don’t think EMH envisions assets with negative expected return.
Mm, the way I remembered was that by not diversifying, you were taking on additional uncompensated risk; not diversifying wasn’t completely neutral, expected-value wise. (Also, there’s obvious ways to guarantee losing money: trade a lot. The fees will kill you.)
Yep, that’s what I said—that you can easily get additional risk by not diversifying.
And the trading fees are outside of EMH—there are certainly plenty of ways to reliably lose money in the real world, but not in the EMH world.
I said ‘uncompensated’ risk.
EMH doesn’t say anything about uncompensated risks.
To get to risk premium you need something like CAPM or APT which are a different kettle of fish.