Risk is not a complete explanation of returns as evidenced by the Equity Premium Puzzle.  Equities over long periods return 6 to 10% in excess of bond returns, but are generally correlated with bonds and not deserving of more than a 1% risk premium (Mehra and Prescott, 1985, confirmed by literally thousands of subsequent papers).

One of the most convincing explanations of the equity premium, in my opinion (full disclosure, it is my explanation) has to do with the necessity of expanding the money supply to keep pace with increases in goods and services due to productivity growth, and prevent deflation.  The mechanism for this is for the central banks to lower interest rates.  Central banks are not rational investors, but have unconstrained ability to create money (trillions, in fact) and do in fact set interest rates.  They are not set by the market.  The jump in money market rates from under 1% to around 8% after the Fed and Treasury allowed Lehman to collapse, and the return to 1% only after the Fed offered what amounted to insurance, illustrate that Fed policy was affecting this supposedly market rate by 7%.

There is a paper you can search for on the web, but the most complete and cogent explanation is in the book linked below.

A second point I make is that volatility reduces returns.  It's a lot like compounding losses in a leveraged ETF.  There are some charts in the book.  Since corporations are using below-market borrowing enabled by the monetary policy made necessary by productivity growth, to leverage their profits by approximately the difference between market and regulated rates, more in some cases, then corporations, and equities generally, function like a leveraged ETF.  Combine this with the fact that the Equity Premium only works for whole market indices, and with the gradual absorption of small businesses by large, and the relatively low volatility S&P 500 index looks like the most reasonable long term play.  I am not able to restrain my own impulse in that regard, however, and dabble in more volatile investments, often to the detriment of my portfolio.  In other words, do as I say, not as I do.

http://www.amazon.com/Equity-Premium-Puzzle-Intrinsic-Monetary-ebook/dp/B00Q67IN8M/

Sergei, thanks for your interest in my analysis.  The equity premium book addresses primarily the long term fundamentals which cause the equity premium regardless of who is trading.  As long as there is productivity growth and a central banker, the conditions for the equity premium hold.  A significant section of the book is devoted to analyzing trends in the longevity of companies, and discusses both the S&P 500 average lifetime on the index, and the trends toward consolidation of small businesses into large.  There is a loss associated with the decreasing company lifetimes, and this is calculated.  Part of the equity premium comes from the consolidation of small companies into large, implying that part does not apply to small companies.  But I'm talking really small companies that would not even show up in the Russell 2k.

At risk of possibly overloading your reading appetite, I'll mention a second book below which addresses some taxation issues, and does some analysis of the many new ETFs showing what to look for and how to "estimate" whether they will capture any of the equity premium or not.  Most don't.  If you read either one, be sure to post a review.

http://www.amazon.com/Money-Wealth-War-Robert-Shuler-ebook/dp/B00UIPW4E2

Sergei, the 20+ private spaceflight companies might be very insightful as to risk models ... this was the initial motivation for the book, in fact ... but I do not have data other than my own model to offer in discussion.  Aside from the lunacy of the egos of rich people, I think it is a lottery effect.  Someone, eventually, will come to dominate a huge industry in, say, 100 years, but most of them will fail.  Each will be priced as if it will be successful (price of its equity).  For this reason, I avoid new offerings of things like solar technology companies.  I do participate in some investments like HTGC which are a bit like venture capital in that they expect to benefit from eventual stock offerings.

Risk models range from classical utility theory to the more recent work by Kahneman and many others after the 1990s. Perhaps you might refocus the question on a specific issue so that a more precise answer can be attempted.I would also look at the work on fast and frugal rules (Gigerenzer and others) ... depending on the time domain of your question.