"But you don't need to be a Nobel Laureate to know that equities are riskier (volatile returns) than cash and as such you would expect higher returns."
"Personally I dont care much about beta or CAPM."
you dont care much for CAPM or beta but you believe that you dont need to be a genius to realise that equities have higher betas than cash. in case you didnt realise, more volatile returns compared to the market means higher betas. since cash is risk-free from the market, its independent from beta. so you are kind of contradicting yourself using the logic of a theory to support your idea but then saying you dont care about it.
anyway, that aside, i was speaking on a more intricate level than your simplistic way of speaking of risk. if you want to compare cash to treasuries to dodgey oil companies then no duh "risk" will look like its correlated to returns. i am talking about companies that may be in the same sector and even business maturity.
why am i asking you such "basic questions"? because you believe there is no 'free cake' in the markets. therefore all excess returns are correlated to having taken on some sort of extra risk to compensate and explain the market anomaly. but this has been proven wrong in the papers i pointed out. sometimes things are just genuinely mispriced - fama and french pointed to value stocks having significantly outperforming growth stocks over decades despite having similar betas.
but since you dont give a rats about CAPM or beta, i would like to know on what basis you believe higher levels of risk lead to higher levels of return other than the very simplistic rational you have put forward.
i am a firm believer in market anomalys and that returns are not correlated to the risk a person takes on. i believe in mispriced assets.
