A risk-averse individual always prefers the basket with the highest standard deviation when choosing among baskets with the same expected value.

Question

Quizplus · Accepted Answer

A risk-averse individual prefers the basket with the lower standard deviation when choosing among baskets with the same expected value. This is because a lower standard deviation indicates less variability and therefore less risk.

A Risk-Averse Individual Always Prefers the Basket with the Highest