Risk averse: Difference between revisions
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imported>Doug Williamson m (Add "expected" before cost.) |
imported>Doug Williamson m (Link with Adverse page.) |
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*[[Risk appetite]] | *[[Risk appetite]] | ||
*[[Efficient market hypothesis]] | *[[Efficient market hypothesis]] | ||
*[[Adverse]] | |||
[[Category: | [[Category:Corporate_finance]] | ||
[[Category: | [[Category:Risk_frameworks]] | ||
Revision as of 16:04, 28 June 2014
To be risk averse means to prefer a lower level of risk, for any given level of expected return or expected cost.
Therefore, for example, risk averse investors will always require a higher expected rate of return to compensate for any higher levels of risk which they accept.
The assumption that market participants are rational and risk averse is one of the underpinnings of the efficient market hypothesis.
