When Higher Risk Leads to Lower Returns

Do you believe that taking riskier equity exposures should reward you with higher returns? Most finance education is founded on the positive correlation between risk and reward. Taking incremental risk would not be worthwhile otherwise. Over the long run (past 10 and 20 years) global and regional equities have not fulfilled that expectation. In fact, the relationship between risk and realized reward appears to be the reverse of what was expected!