Risk aversion implies that investors require higher expected returns on risky securities if they are to be induced to purchase them.

Question

Quizplus · Accepted Answer

Risk aversion means investors are less willing to take on risk, and therefore they require higher expected returns to compensate them for taking on that risk. This is because they expect to be compensated for the possibility of losing money on those investments.

Risk Aversion Implies That Investors Require Higher Expected Returns on Risky