Risk lover

Risk lover

A person willing to accept lower expected returns on prospects with higher amounts of risk.

Risk Lover

An investor who is willing to take big risks to increase the potential return on investments. For example, a risk lover would be more likely to invest in the IPO of a company with a new and exciting product about which little is known, than to invest in the secured bond issued by a company everyone knows and trusts. Critics maintain that risk lovers accept lower returns for their risk and, as such, are not investing efficiently. See also: Markowitz efficient portfolio.
References in periodicals archive ?
The term mixed risk aversion, introduced by Caballe and Pomansky (1995), applies to an individual who dislikes an increase in risk of any degree, while the term mixed risk lover, introduced by Crainich, Eeckhoudt, and Trannoy (2013), describes an individual who dislikes increased risk for odd orders but likes increased risk in even orders.
Explanatory CRRA Takes two values: (i) 1, if the individual is risk lover; and (ii) 0, other way.
TABLE 4 Distribution of Risk Attitudes Number Holt and Our Experiment of Safe Holt and Laury Laury Benchmark Choice Choices Classification Experiment Treatment Treatment 0-1 Highly risk lover 0.01 0.05 0.00 2 Very risk lover 0.01 0.00 0.02 3 Risk lover 0.06 0.05 0.10 4 Risk neutral 0.26 0.18 0.22 5 Slightly risk-averse 0.26 0.18 0.15 6 Risk-averse 0.23 0.32 0.30 7 Very risk-averse 0.13 0.17 0.17 8 Highly risk-averse 0.03 0.03 0.03 9-10 Stay in bed 0.01 0.02 0.02 Note: The number of safe choices corresponds to the number of the decisions with the "safe" Option A and thus corresponds to the "risk aversion" variable in our econometric analysis.
A risk lover would opt for a higher return with a lower probability of occurring, point B in Figure 2-8.
On the other hand, if the individuals' risk index is near zero then this individual is considered a risk lover since relatively few precautions are taken.
It also excludes the entire behavioral approach to finance and the role of risk lovers. We think the fundamental bedrock on which all asset pricing models lie should be re-examined.
They act as intellectuals and behave as risk lovers. They fail to predict the rare event which certainly happens sooner or later.
The F/L bias could also originate from bettors' loss-aversion, a behavioral attitude that can make bettors act as risk lovers in order to close their betting day without losses.
25 July 2011 - JP Morgan considers that Swedish drug developer Active Biotech AB (STO: ACTI) offers an attractive risk/reward ratio to risk lovers ahead of the results from a second Phase III study of multiple sclerosis (MS) drug candidate laquinimod.
"If they think the situation will stabilize, they won't run; but if they think it will not stabilize anytime soon, they will run fast," he added, "risk lovers will stay in Egypt and risk neutrals will analyze the situation and those who are afraid of risks will take their money elsewhere."
(24.) If adult bicycle riders are risk lovers, our estimates of VSL for adults might be too low.
They conclude that for risk averters and risk lovers, prudence guarantees precautionary saving.

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