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 ?
Risk Aversion and Liquidity Protection Are Different
Risk Aversion Hypothesis: The likelihood of self-insurance is positively related to risk aversion (as proxied by a lower deductible).
A slight easing in extreme risk aversion this week has allowed sterling some breathing space from investor deleveraging, leaving the pound on track for its biggest weekly percentage gain since late 2006.
which measures the absolute slope of a given indifference curve and is diminishing due to the assumption of risk aversion (U"(I) < 0).
Individuals who were unwilling to accept any income gambles should have a larger coefficient of risk aversion than those who accepted income gambles.
The new paper, "Gender differences in financial risk aversion and career choices are affected by testosterone," has been published in the August 24, 2009 early edition of the Proceedings of the National Academy of Sciences (PNAS).
That the effects of testosterone on risk aversion are strongest for individuals with low or intermediate levels of this hormone is similar to what has been shown for the effects of testosterone on spatial cognition.
6746 as an increase in risk aversion and news that first quarter GDP contraction was larger than expected at 2.
Risk aversion for moderate and high probabilities is a factor in probability discounting studies because the procedures typically ask for choices in one-shot situations where there is a possibility of receiving nothing.
In his recent speech the Prime Minister Tony Blair echoed the sentiment of his colleague Gordon Brown regarding the potentially damaging impact that risk aversion can have on business.
To be published six times a year, Applied Financial Economics Letters is a companion journal to T&F's Applied Financial Economics and publishes short accounts of new financial and economic research on such topics as hedging, spot-futures markets, stock prices as predictive tools, risk aversion, competition, identification of currency crises and interest rate options.
It left a hangover of risk aversion that many are still trying to shake.

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