risk aversion

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Risk Aversion

The subjective tendency of investors to avoid unnecessary risk. It is subjective because different investors have different definitions of unnecessary. An investor seeking a large return is likely to see more risk as necessary, while one who only wants a small return would find such an investment strategy reckless. However, most rational economic actors are sufficiently risk averse such that, given two investments with the same return and different levels of risk, they would choose the less risky investment.

risk aversion

The tendency of investors to avoid risky investments. Thus, if two investments offer the same expected yield but have different risk characteristics, investors will choose the one with the lowest variability in returns. If investors are risk averse, higher-risk investments must offer higher expected yields. Otherwise, they will not be competitive with the less risky investments.

risk aversion

the tendency for managers, consumers and other decision-makers to avoid undertaking risks and to choose less risky alternatives. See RISK PREMIUM.

risk aversion

the tendency for managers, consumers and other decision makers to avoid undertaking risks and to choose less risky alternatives. See RISK PREMIUM.
References in periodicals archive ?
aging) suggests that preference for smoothing (and perhaps risk-aversion) might also arise endogenously and testable restrictions--across species, across time, or across genders--among time preference, aging, and risk-aversion could be analyzed in a simple framework.
Similarly, the yen, another barometer for risk-aversion, peaked against the dollar around 11:30 am before dropping 27.
Last week was marked by the failure of the bailout plan for the 'Big Three' US automakers to pass US Senate approval, which increased the already high levels of risk-aversion in the currency markets.
Unfortunately for its shareholders, LTCM chose this exposure just as financial market uncertainty and investor risk-aversion began to rise rapidly around the world.
With these types of changes, the distressing tendency toward risk-aversion that is occurring in the management of long-term care facilities nationwide could be reversed.
However up until now, cost and risk-aversion have been major technology investment deterrents.
Investors' appetite for Japanese government bonds remained strong amid global risk-aversion and the yield, which moves inversely to price, will likely continue to decline for the time being, said an official at a foreign brokerage in Tokyo.
The yen continued to remain strong as a wave of risk-aversion swept the global markets.
As absolute risk aversion decreases with wealth, a higher level of endowed wealth raises the wealth level in every loss state reduces the risk-aversion attitude of the individual and hence lowers the individual's demand for insurance coverage.
1) Barillas, Hansen, and Sargent (2007) show that by interpreting [gamma] as measuring fear of model misspecification rather than risk-aversion, a moderate fear of model misspecification can do most of the job of the large risk-aversion parameters of Tallarini (2000) and Bansal and Yaron (2004) in explaining the equity premium.
Even with that risk-aversion the model portfolio has returned 85% since January 1.
Solid closings at European markets also facilitated buying by easing risk-aversion among investors, they said.

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