Risk aversion means:
A) investors prefer less risk when expected returns are equal.
B) investors always choose low risk stocks.
C) gamblers don't behave rationally.
D) investors avoid risk at all costs.

Question

Quizplus · Accepted Answer

Risk aversion refers to the behavior of investors who prefer less risk when expected returns are equal. It does not mean that investors always choose low-risk stocks or avoid risk at all costs. It is a rational behavior that seeks to minimize the negative effects of potential losses.

Risk Aversion Means