Comment"risky stocks offer the investor a good shot at very high profits,so stocks should sell at a premium

Nope...

You said it yourself, RISKY stocks. This refers to DOWNSIDE potential. (People don't usually worry about the "risk" that their stock will rise rapidly in value.)

In one of those periods of "irrational exuberance" there might be some tiny bit of premium, but on the other hand, in times like these that premium goes to breakfast cereal and detergent stocks.

I am trying to figure out what your question here is. You seem to be making a statement. Risky stocks are risky because they might provide a greater rate of return then a less risky company with steady income growth (such as an XOM or GE) but there is a much greater changer of loss. Check out the volitility of a company like DYN and CPN over the last three years to get an idea of what I mean.

Indeed you are sometimes correct. Extremely risky stock do at times sell at very high premiums because people fantisize that they are going to make a killing. Recent cases in point are XMSR and SIRI. Frankly I wonder whether either is worth 2 cents a share. Ten years ago it was biotech stocks. Most are history now. And I probably do not have to remind you about the dot. com stocks of the late 90's.

Everyone wants to get rich quick. Most of the time they wind up making someone else rich like Bernie Ebbers.