Risk Aversion Notes: Definitions & Explanations PDF | Download eBooks
Study Risk Aversion lecture notes PDF with organizational behavior definitions and explanation to study “What is Risk Aversion?”. Study risk aversion explanation with organizational behavior terms to review organizational behavior course for online MBA programs.
Risk Aversion Definition:
Tendency to prefer a sure gain of a moderate amount over a riskier outcome, even if the riskier outcome might have a higher expected payoff.
Organizational Behavior by Stephen P. Robbins, Timothy A. Judge
Risk Aversion Notes:
In economics and finance, risk aversion is the behavior of humans (especially consumers and investors), who, when exposed to uncertainty, attempt to lower that uncertainty. It is the hesitation of a person to agree to a situation with an unknown payoff rather than another situation with a more predictable payoff but possibly lower expected payoff. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value. The most straightforward implications of increasing or decreasing absolute or relative risk aversion, and the ones that motivate a focus on these concepts, occur in the context of forming a portfolio with one risky asset and one risk-free asset.
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