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Risks and Uncertainty

In: Norway’s Sovereign Wealth Fund

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  • Ole Bjørn Røste

    (Norwegian University of Science and Technology)

Abstract

This chapter discusses the unknown future. With uncertainty, something good or bad may happen. In investment, one is often concerned with the likelihood of the latter. Then there are complicating unknown unknowns. The investments return known only ex post sums it up as for a roulette ball that has reached standstill. Economic slumps represent risk. Everyone may have been too optimistic regarding the future. Asset prices could fall sharply, particularly for stocks and fixed real assets. For SWFs, slumps may be the most important risk. Another important factor is political stability. The world became safer for investment around 1990. Still, geopolitics represents a risk that has excluded some areas from receiving investments. However, for most investors more mundane, traditional risks dominate. A further uncertainty is demographics. Resource wealth is diluted by immigration. Traditional Norwegians have few children, late in life. Newcomers have higher birth rates and are not integrated in the labor market. Higher immigrant employment rates and more successful integration seems needed for long-term success and sustainability.

Suggested Citation

  • Ole Bjørn Røste, 2021. "Risks and Uncertainty," Natural Resource Management and Policy, in: Norway’s Sovereign Wealth Fund, chapter 0, pages 163-207, Springer.
    • Handle: RePEc:spr:nrmchp:978-3-030-74107-5_6
    DOI: 10.1007/978-3-030-74107-5_6
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