Risk aversion is a general dislike for risk,and a preference for certainty.If risk aversion exists in the market,then investors in general are willing to accept somewhat lower returns on less risky securities.Different investors have different degrees of risk aversion,and the end result is that investors with greater risk aversion tend to hold lower-risk (and therefore lower-expected-return) securities than investors who have more tolerance for risk.

Question

Quizplus · Accepted Answer

This statement accurately describes the concept of risk aversion and how it affects investment decisions. Investors with higher risk aversion tend to prefer lower-risk securities with lower expected returns, while those with lower risk aversion may be more comfortable taking on riskier investments with potentially higher returns.

Risk Aversion Is a General Dislike for Risk,and a Preference