risk aversion


Also found in: Dictionary, Thesaurus, Medical, Legal, Encyclopedia, Wikipedia.

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 ?
As there are two parameters concerning the degree of retailer's risk aversion, we must consider every possible combination of [alpha] and [beta].
These estimates can be combined with data for each individual on hours of work, labor income, and nonlabor income to create a unique wage elasticity, income elasticity, and risk aversion coefficient for each individual in the sample.
A degree of constant absolute risk aversion ([gamma]) is defined as [gamma]=-[[[u.
However, in men and women with similar levels of testosterone, the gender difference in risk aversion disappeared.
Reduction in risk aversion at moderate and high probabilities may nullify the reverse magnitude effect observed in studies of probability discounting.
Risk aversion, or bureaucratic defensive action by the organisations that lie at the heart of wealth creation in the UK will undermine their competitiveness and the wellbeing of the UK economy.
2), raises the required risk aversion by a factor of 5, to 165
Increased risk aversion and a consolidating US market could also stun the Japanese market's recovery, especially since foreign investors have provided the main source of buying for Japanese equities.
Utility is assumed to be increasing in consumption at a diminishing rate, implying risk aversion.
Risk aversion estimated from the medium-term risk, despite being much lower than risk aversion estimated from the contemporaneous risk, is still implausibly high and so rejects the set of assumptions embodied in this measure.
Wall Street still managed to close with slight gains yesterday, but risk aversion picked up again and concerns of a global trade war intensified, after the resignation of Trump's top economic adviser Gary Cohn.
TOKYO, April 12 (KUNA) -- The US Dollar fell to a five-month low against the Japanese yen into the lower JPY 109 range on Wednesday, due to risk aversion amid increasing geopolitical tensions.

Full browser ?