what is risk aversion?

Answer 1

I think it's a dislike of risk taking. In finance, for example, it would include avoiding risky stocks and instead investing in more stable stocks and bonds...

Answer 2

Risk aversion can be summed up by the phrase "A bird in the hand is worth two in the bush"

I make my money on sportsbook gambling, and believe me there's a number of people out there who would rather have a guaranteed $10 than an even money chance of $100.

Risk aversion is VERY common. I'd say the great majority of people are risk averse to some degree. This is one of the reasons why it is possible for people who are not risk averse to make money - in business or in gambling.

Answer 3

Risk aversion occurs whenever one fears a loss more than one desires a gain of an equal amount. For example, say you propose to me the following simple bet: We toss a coin, and if it's heads, you give me $10,000 and if it's tails I give you $10,000. I would not take the bet, because while the gain of $10,000 would be nice, the loss of $10,000 would be devestating to me. I am risk averse. I wouldn't take that bet even if you had to pay me $15,000 and I still only had to pay you $10,000.

Answer 4

When the boss is too much of a wimp to take any form of risk. Playing it safe. Being gay.

Answer 5

It's when you avoid dangerous activities, such as investment, buying shares, etc.Economists take it under consideration when analyzing the behavior of agents (big companies,consumers,..) as it alternates calculations.