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    • Risk aversion (psychology) - Wikipedia
      • From Wikipedia, the free encyclopedia For the economic concept, see Risk aversion. Risk aversion is a preference for a sure outcome over a gamble with higher or equal expected value. Conversely, the rejection of a sure thing in favor of a gamble of lower or equal expected value is known as risk-seeking behavior.,equal%20expected%20value%20is%20known%20as%20risk-seeking%20behavior.
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    What is risk aversion?

    What is risk aversion in psychology?

    What distinguishes loss aversion from risk aversion?

    Is wealth a good proxy for risk aversion?

  2. Risk aversion - Wikipedia

    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.

  3. Risk aversion (psychology) - Wikipedia

    From Wikipedia, the free encyclopedia For the economic concept, see Risk aversion. Risk aversion is a preference for a sure outcome over a gamble with higher or equal expected value. Conversely, the rejection of a sure thing in favor of a gamble of lower or equal expected value is known as risk-seeking behavior.

  4. From Wikipedia, the free encyclopedia For the related psychological concept, see Risk aversion  (psychology). Risk aversion (red) contrasted to risk neutrality (yellow) and risk loving (orange) in different settings. Left graph: A risk averse utility function is concave (from below), while a risk loving utility function is convex.

  5. Hyperbolic absolute risk aversion - Wikipedia

    From Wikipedia, the free encyclopedia In finance, economics, and decision theory, hyperbolic absolute risk aversion (HARA) refers to a type of risk aversion that is particularly convenient to model mathematically and to obtain empirical predictions from.

  6. Risk aversion | Psychology Wiki | Fandom
    • Example
    • Utility of Money
    • Measures of Risk Aversion
    • Limitations
    • Risk Aversion in The Brain
    • Public Understanding, and Risk in Social Activities
    • See Also
    • External Links

    A person is given the choice between two scenarios, one with a guaranteed payoff and one without. In the guaranteed scenario, the person receives $50. In the uncertain scenario, a coin is flipped to decide whether the person receives $100 or nothing. The expected payoff for both scenarios is $50, meaning that an individual who was insensitive to risk would not care whether they took the guaranteed payment or the gamble. However, individuals may have different risk attitudes. A person is: 1. r...

    In utility theory, a participant has a utility function $ U(x) $ where $ x $ represents the value that he might receive in money or goods (in the above example x could be 0 or 100).Time does not come into this calculation, so inflation does not appear. (The utility function $ u(c) $ is defined only modulo linear transformation - in other words a constant factor to be added to the value of U(x) for all x, and/or U(x) could be multiplied by a constant factor, without affecting the conclusions.)...

    The higher the curvature of $ u(c) $, the higher the risk aversion. However, since expected utility functions are not uniquely defined (only up to affine transformations), a measure that stays constant is needed. This measure is the Arrow-Pratt measure of absolute risk-aversion (ARA), after the economists Kenneth Arrow and John W. Pratt or coefficient of absolute risk aversion, defined as The following expressions relate to this term: 1. Exponential utility of the form $ u(c)=-e^{-\\alpha c} $...

    The notion of (constant) risk aversion has come under criticism from behavioral economics. According to Matthew Rabin of UC Berkeley, a consumer who, from any initial wealth level [...] turns down gambles where he loses $100 or gains $110, each with 50% probability [...] will turn down 50-50 bets of losing $1,000 or gaining any sum of money. The point is that if we calculate the constant relative risk aversion (CRRA) from the first small-stakes gamble it will be so great that the same CRRA, a...

    Attitudes towards risk have attracted the interest of the field of neuroeconomics. A study by researchers at the University of Cambridge suggested that the activity of a specific brain area (right inferior frontal gyrus) correlates with risk aversion, with more risk averse participants (i.e. those having higher risk premia) also having higher responses to safer options. This result coincides with other studies , that show that neuromodulation of the same area results in participants making...

    In the real world, many government agencies, such as the British Health and Safety Executive, are fundamentally risk-averse in their constitution. This often means that they demand (with the power of legal enforcement) that risks be minimized, even at the cost of losing the utility of the risky activity. It is important to consider the opportunity cost when mitigating a risk; the cost of not taking the risky action. Writing laws focused on the risk without the balance of the utility may misre...

    1. Ambiguity aversion 2. Compulsive gambling, a contrary behavior 3. Defensive medicine 4. Equity premium puzzle 5. Loss aversion 6. Neuroeconomics 7. Optimism bias 8. St. Petersburg paradox

    1. More thorough introduction 2. Paper about problems with risk aversion 3. Economist article on monkey experiments showing behaviours resembling risk aversion (requires a paid subscription to 4. Arrow-Pratt Measure on 5. Risk Aversion of Individuals vs Risk Aversion of the Whole Economy

  7. Loss aversion - Wikipedia

    What distinguishes loss aversion from risk aversion is that the utility of a monetary payoff depends on what was previously experienced or was expected to happen. Some studies have suggested that losses are twice as powerful, psychologically, as gains. Loss aversion was first identified by Amos Tversky and Daniel Kahneman.

  8. Risk premium - Wikipedia

    For an individual, a risk premium is the minimum amount of money by which the expected return on a risky asset (such as stock) must exceed the known return on a risk-free asset (such as a Treasury bond) in order to induce an individual to hold the risky asset rather than the risk-free asset. It is positive if the person is risk averse.

  9. Ambiguity aversion - Wikipedia

    In decision theory and economics, ambiguity aversion (also known as uncertainty aversion) is a preference for known risks over unknown risks. An ambiguity-averse individual would rather choose an alternative where the probability distribution of the outcomes is known over one where the probabilities are unknown.

  10. Risk - Wikipedia

    In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environment), often focusing on negative, undesirable consequences.

  11. Prospect theory - Wikipedia

    The prospect theory starts with the concept of loss aversion, an asymmetric form of risk aversion, from the observation that people react differently between potential losses and potential gains.