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The basic logic behind the capital-asset pricing model is that there is no premium for bearing risks that can be diversified away. Thus, to get a higher average long-run rate of return, you need to increase the risk level of the portfolio that cannot be diversified away. According to this theory, savvy investors can outperform the overall market by adjusting their portfolios with a risk measure known as beta.
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
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