I believe the returns from assets are determined ultimately by fundamental  factors. 

Fundamental factors include economic variables such as growth, inflation, debt, asset value, cash-flow and financial variables such as real yields and liquidity. An asset’s ultimate return is solely determined by fundamental factors.

Investors must have an opinion on each of the fundamental factors and determine whether their opinion is different to the central forecast in the market. 

An asset can deviate from its fundamental valuation creating an investment opportunity. The reason for this perceived deviation from fundamental value is the investor has a different opinion on the prospective out-turn of the fundamental factors from that of the market.

The dynamic affecting assets is also important. Dynamic factors are determined by other investors’ tolerance for risk and the dispersion of their forecasts for prospective returns of an asset.

Dynamic factors change the path of returns from the contemporaneous price of an asset to the terminal price of the asset, hence its return. Eventually the fundamental factors will correctly determine the asset’s eventual return, but the road travelled may be rocky. 

Dynamic factors also affect the time horizon over which the fundamental factors will correctly determine the terminal value of an asset. 

Investors can take risk and implement an investment view if they have a different

1. •time horizon to the rest of the market
   

2. •assumption about the assumed out-turn of the fundamental factors to the rest of the market
   

3. •level of liquidity preference to the rest of the market
   

Investors should have an holistic approach to investing, scouring the world for investment opportunities, seeking volatility where they can, and off-laying risk in the cheapest possible way.