Risk aversion is a concept in psychology, economics, and finance, based on the behavior of humans (especially consumers and investors) while exposed to uncertainty to attempt to reduce that uncertainty.
Risk aversion is the reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower, expected payoff. For example, a risk-averse investor might choose to put his or her 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.
Read more about Risk Aversion: Example, Utility of Money, Limitations, Risk Aversion in The Brain, Public Understanding and Risk in Social Activities
Famous quotes containing the words risk and/or aversion:
“Maybe we were the blind mechanics of disaster, but you don’t pin the guilt on the scientists that easily. You might as well pin it on M motherhood.... Every man who ever worked on this thing told you what would happen. The scientists signed petition after petition, but nobody listened. There was a choice. It was build the bombs and use them, or risk that the United States and the Soviet Union and the rest of us would find some way to go on living.”
—John Paxton (1911–1985)
“When in a serious mood, it seems to me that those people are illogical who feel an aversion toward death. As far as I can see, life consists exclusively of horrors, unpleasantnesses and banalities, now merging, now alternating.”
—Anton Pavlovich Chekhov (1860–1904)