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 ?
If the traits are risk-aversion and project risk, then both PAM and NAM are possible and there is no clear prediction about the relationship between risk aversion and the power of incentives.
The continuous variable of risk-aversion index was used in the logistic regression analysis.
''It is not a time for anyone to buy the euro'' and the single European currency could further fall on risk-aversion, he said.
Similarly, the yen, another barometer for risk-aversion, peaked against the dollar around 11:30 am before dropping 27.1 pips in the afternoon to trade at USD/JPY 89.892. 
To some extent, a sudden change in investor's sentiment towards more risk taking has been helping stocks and commodities to stage substantial rallies and the safe-haven US dollar seems to be giving back some of its previous risk-aversion gains.
Byline: Failure of Big Three rescue plan increases the already high levels of risk-aversion in the financial markets
Consequently, risk-aversion can be defined in terms of the concerns and outlook of the agent and not the derivatives of a utility function.
Jensen, 1991, "Total Risk-Aversion and the Pricing of Options", Applied Mathematics and Optimization, 23:51-76
"The continuing series of shocks endured by the economy in 2002 created an atmosphere of risk-aversion among corporate decision makers," said Studley Chairman and CEO Mitchell Steir.
with respect to the risk-aversion index [rho] to obtain
adjustment for case mix, risk-averse physicians generated higher expenditures; a one standard deviation increase in risk-aversion was associated with a 3% increase in expenditures (95% CI, 1% - 5%).
Unfortunately for its shareholders, LTCM chose this exposure just as financial market uncertainty and investor risk-aversion began to rise rapidly around the world.

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