I totally agree that risk is a necessary rather than a sufficient condition for higher returns. However, there is a second point that has to be highlighted: the risk/return paradigm is a forward-looking concept. This is why many financial economists argue that not returns have to be positively correlated with risk, but expected returns with risk! Of course, if with cannot test the link between expected returns and risk if we compare historical returns with historical risk. But there is very strong forward-looking evidence that investors expect higher ruturns if they take on more risk. Example: corporate bonds have higher yields than government bonds because of higher default risk etc.