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Topic: Risk aversion

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Loss aversion

Certainty equivalent

Risk premium

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	Risk aversion - Wikipedia, the free encyclopedia
		Risk aversion is a concept in economics, finance, and psychology explaining the behaviour of consumers and investors under 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.
		In Modern Portfolio Theory, risk aversion is measured as the marginal reward an invester wants to receive if he takes for a new amount of risk.
	en.wikipedia.org /wiki/Risk_aversion (585 words)

	Risk - Wikipedia, the free encyclopedia
		Risk is the potential impact (positive or negative) to an asset or some characteristic of value that may arise from some present process or from some future event.
		Risk is often mapped to the probability of some event which is seen as undesirable.
		Risk in that case is the degree of uncertainty associated with a return on an asset.
	en.wikipedia.org /wiki/Risk (1940 words)

	ipedia.com: Risk Article (Site not responding. Last check: 2007-10-06)
		In scenario analysis "risk" is distinct from "threat." A threat is a very low-probability but serious event - which some analysts may be unable to assign a probability in a risk assessment because it has never occurred, and for which no effective preventive measure is available.
		A professional code of ethics is usually focused on risk assessment and mitigation (by the professional on behalf of client, public, society or life in general).
		Risk assessments with differing ways of determining public concerns are a major concern of political parties.
	www.ipedia.com /risk.html (1903 words)

	Individual differences in risk aversion and anxiety (Site not responding. Last check: 2007-10-06)
		Risk aversion was correlated with the tendency to believe that bad outcomes were both likely and particularly bad, and these beliefs were correlated with depressive symptoms and with pessimistic attributional style.
		Risk aversion in decision making is the tendency to avoid options associated with uncertain outcomes that differ in their desirability (Baron, 1994).
		Our measure of risk aversion was the subject's probability that she would choose the less risky option if she were faced with a situation like the one described.
	www.sas.upenn.edu /~baron/amyold.html (4007 words)

	Risk Aversion
		Risk aversion means that you would pay more than $100 (the expected or "actuarially fair" value) for an insurance policy that would reimburse you for that $10,000 loss, if it happens.
		The person who wants risk protection, such as a ballet dancer who wants compensation if his or her legs are hurt, pays a group of participants to share the risk.
		However, the risks of financial loss, or of needing medical care that one cannot finance oneself, these risks are socially determined.
	hadm.sph.sc.edu /COURSES/ECON/RiskA/RiskA.html (3225 words)

	Evidence of Risk Aversion
		Relative risk aversion is estimated using the 1994 wave of the Health and Retirement Study, a large nationally representative sample of households nearing retirement.
		The effects of age on risk aversion are further complicated by the possibility of cohort effects.
		For example, the observation that a baby boomer couple carries a higher risk portfolio than their parents at the same age, may be due to their age or it may be to the greater conservatism of people in a cohort that has lived in the post-depression era.
	www.aria.org /rts/proceedings/1999/risk_aversion.htm (5634 words)

	Indifference Curves and Risk Aversion (Site not responding. Last check: 2007-10-06)
		It can be drawn on a two-dimensional graph, where the horizontal axis usually indicates risk as measured by variance or standard deviation and the vertical axis indicates reward as mesured by expected return.
		Risk averse investors will not want to take fair gambles (where the expected payoff is zero).
		These two assumptions of nonsatiation and risk aversion cause indifference curves to be positively sloped and convex.
	www.cs.brandeis.edu /~magnus/stocks/node3.html (232 words)

	RISK: Articles and Comments by Title (A-M)
		James Valverde A., Jr., The Cognitive Status of Risk: A Response to Thompson --- Discusses the role of probability theory in risk analysis and management; argues against overemphasis on the distinction between risk subjectivism and risk objectivism....
		Linda-Jo Schierow, Comparison of Environmental Risk Provisions in the 103d Congress --- Provisions of several House and Senate bills, including a proposal for improved risk assessment, are compared in tabular format....
		Jonathan Baert Wiener, Managing the Iatrogenic Risks of Risk Management --- Analogizing to concerns that led the practice of medicine to shift from a specialist to a team-based approach, suggests that public and environmental health objectives would be better served if, e.g., regulatory jurisdiction were less atomized.....[.pdf] 9.39 (1998).
	www.fplc.edu /risk/rskarts.htm (3846 words)

	EducationGuardian.co.uk \| eG weekly \| Risk aversion
		Multiply materiality by likelihood and you get a completely fatuous figure, which you can pretend is a "real measure of risk", and this will make the auditors go away.
		The problem is that the enthusiasts then insist that your risk register be "embedded".
		The real risk is that I might forget to let the directorate out of the small committee room before they run out of air.
	education.guardian.co.uk /egweekly/story/0,5500,1233139,00.html (675 words)

	decomposing risk aversion (Site not responding. Last check: 2007-10-06)
		Meanwhile, gold, impacted by a broader theme of risk aversion, has continued to rise.
		Decomposing risk aversion and subsequent outlier trades: Broadly speaking, risk aversion has primarily impacted U.S. assets (with the exception of select emerging markets like Turkey).
		The “risk” in this case can be decomposed into two primary components, firstly, the risk of a war against Iraq of which the more specific risk is of unilateral U.S. action against Iraq, and secondly, a persistently weak U.S. economic recovery.
	www.macroanalytics.com /html/decomposing_risk_aversion.html (757 words)

	Good afternoon, ladies and gentlemen (Site not responding. Last check: 2007-10-06)
		The prevailing opinion in the Pentagon of risk aversion, when it is discussed at all, is that it is either a result of the downsizing that was forced upon the Army or a result of declining budgets.
		In a politicized, risk averse organization, the most successful members will be those that have adapted their behavior to the apparent and regularly demonstrated vales of the organization while publicly expressing their support of the supposedly stated values of the organization.
		They were able to do this incredible feat, despite the hyperinflation of the 1920’s and the depression of the 1930’s, by focusing of the creation of an experienced, risk taking officer corps that had the trust of their senior leadership and trusted them in turn.
	www.usafa.af.mil /jscope/JSCOPE99/Bell99-2.html (3016 words)

	Scobleizer - Microsoft Geek Blogger » Kathy posts ‘Death by risk aversion’
		Personally the last week has seen two risks from me, the first is buying airline and hotel tickets for a massive conference/event trip in the USA for March before half the conference details are confirmed.
		I would say that ‘Death by risk aversion’ is very common…and it’s less visible to us when it happens to individuals, instead of companies.
		The problem is with personal risk aversion, when you commit yourself to an environment or situation because of the so called ’safety’.
	scobleizer.wordpress.com /2006/01/30/kathy-posts-death-by-risk-aversion (2760 words)

	AVERSION - Strategic Risk Management
		Aversion is a strategic risk management company providing security consultancy, operational support, security training and product representation.
		As specialists with an extensive network of contacts within the Middle Eastern security industry, Aversion is well-positioned to help clients navigate through the myriad of political & cultural complexities in the region.
		As a strategic risk management company Aversion provides a comprehensive range of value-added services and solutions to international companies and private clients.
	www.aversionsrm.com (107 words)

	Theory of Risk Aversion
		We first turn to the concept of univariate "risk aversion" which, intuitively, implies that when facing choices with comparable returns, agents tend chose the less-risky alternative, a construction we owe largely to Milton Friedman and Leonard J. Savage (1948).
		Thus, an alternative would be to weight the measure of risk aversion by the level of wealth, x.
		In Figure 7, the risky asset y is represented by the chord connecting points A and B on the utility curve, and E[u(y)] is expected utility of asset y.
	cepa.newschool.edu /het/essays/uncert/aversion.htm (6248 words)

	Game Theory .net - Risk and Certainty Equivalent Applet
		People differ in how much they are willing to take risks, and what kind of stakes are worth taking a risk for.
		Because ending the year without any money is too great a risk, the person purchases insurance against the risk at a cost of $75,000.
		Now that you are familiar with the basic concepts of risk, you may try them out in a simulation.
	www.gametheory.net /Mike/applets/Risk (1174 words)

	EconPapers: Measuring State-Dependent Risk Aversion Using Data Augmentation
		Since fluctuations in marginal utility can be ascribed to variations in levels of risk aversion as well as in levels of consumption, we obtain a valuation equation in which the vector of excess returns on equity reflects both consumption risk as well as the risk associated with variations in the state variables.
		Since consumption risk is not forced to account for the entire risk premium, our results contrast sharply with estimates from models in which risk aversion is state- independent.
		We find that relaxing fixed risk preferences yields estimates for relative risk aversion that are centered at 0.9 and are highly counter-cyclical, i.e.
	econpapers.repec.org /paper/lvllaeccr/9507.htm (267 words)

	TimingCube - The best contrary indicator - contrary indicator,risk aversion,herd mentality,logical fallacies,unemotional
		The underlying cause of risk aversion is that we all want to be proud of our great investment results and avoid the remorse associated with a losing trade.
		For example, when the market is moving down we perceive higher risk than when it moves up, despite holding the same exact investment and that the odds of the market reversing are about the same in both scenarios.
		Curiously, investors become more risk averse when facing the prospect of a gain, and more risk seeking when facing the prospect of a loss.
	www.timingcube.com /020604/index.php (948 words)

	Anomalies: Risk Aversion
		Economists ubiquitously employ a simple and elegant explanation for risk aversion: It derives from the concavity of the utility-of-wealth function within the expected-utility framework.
		We show that this explanation is not plausible in most applications, since anything more than economically negligible risk aversion over moderate stakes requires a utility-of-wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes.
		"Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol.
	ideas.repec.org /a/aea/jecper/v15y2001i1p219-232.html (805 words)

	Risk Aversion and Incentive Effects - Charles, Susan, Laury (ResearchIndex)
		Abstract: A menu of paired lottery choices is structured so that the crossover point to the high-risk lottery can be used to infer the degree of risk aversion.
		With "normal" laboratory payoffs of several dollars, most subjects are risk averse and few are risk loving.
		In contrast, subjects become considerably more risk averse when the high payoffs are actually paid in cash.
	citeseer.ist.psu.edu /344690.html (472 words)

	Risk Aversion And The Winner's Curse - Charles, Roger (ResearchIndex)
		The Nash equilibrium for two rational bidders is shown to be independent of risk attitudes.
		While explanations emphasizing risk aversion work well in first price auctions, they are less useful in explaining overbidding...
		Holt, Charles A. and Roger Sherman (2000) "Risk Aversion and the Winner's Curse," Working Paper, University of Virginia.
	citeseer.ist.psu.edu /342146.html (661 words)

	Library Web Chic » Blog Archive » Death by Risk Aversion
		When I saw this article I decided that it was a must read for the rest of the committee because from my point of view I work in a very risk aversion oriented organization.
		Philosophically the author of “Death by Risk Aversion” and I agree.
		One of the benefits of having a scary illness or major loss is that it reminds you of just how much time is ticking away, and that you always have options to make changes.
	www.librarywebchic.net /wordpress/2006/02/13/death-by-risk-aversion (585 words)

	CUNA
		You will learn about the relationship between beta and risk aversion, and also about beta books, which are publications that present betas periodically to investors.
		The Risk Premium and the Risk-Free Rate - The relationship between risk and return is fundamental to investing.
		The material here is meant to help you evaluate the risk levels of investments so that you can choose them according to your own risk tolerance.
	www.creditunion.coop /tutorials/tl249242250.html (278 words)

	SSRN-On A Simple Survey Measure Of Individual Risk Aversion by Joop Hartog, Ada Ferrer-i-Carbonell, Nicole Jonker
		We ask individuals for their reservation price of a specified lottery and deduce their Arrow-Pratt measure of risk aversion.
		Entrepreneurs are less risk averse than employees, civil servants are more risk averse than private sector employees, and women are more risk averse than men.
		We conclude that a simple lottery question is a promising survey instrument to extract differences in risk attitudes among individuals.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=260938 (312 words)

	NCPA - Economic Issues - Loss Aversion Explains Risk Aversion (Site not responding. Last check: 2007-10-06)
		This same person will also turn down a $20,000 risk / $85,750 gain on a 50-50 gamble (a fairly good risk), and a potential $1,000 loss/$718,190 gain.
		Rabin argues that the reason people are risk adverse is that they are loss averse: they fear losing the value they have more than they are attracted to the possibility of big gains.
		Rabin says this is a better explanation of loss aversion than the diminishing utility of wealth.
	www.ncpa.org /pd/economy/pd022201f.html (346 words)

	Poverty Measurement Under Risk Aversion Using Panel Data
		This paper shows how to take into account risk aversion when measuring poverty under income variability.
		An application to British panel data suggests that income and poverty comparisons between the self-employed and other groups of households are sensitive to assumptions on the degree of risk aversion.
		The results point to the importance of panel data in order to account for risk aversion and income variability in the measurement of poverty.
	www.bepress.com /bejeap/contributions/vol3/iss1/art13 (153 words)

	Risk-Averse Firms in Oligopoly
		I show how more risk aversion will influence a firm's best response strategies, and that competition is unambiguously softer only in case of marginal cost uncertainty.
		In contrast to risk neutrality, the best response strategies depend on the level of fixed costs.
		"Risk Vulnerability and the Tempering Effect of Background Risk," Econometrica, Econometric Society, vol.
	ideas.repec.org /p/hhs/hastef/0069.html (767 words)

	Zhang, Qiang: Decreasing Relative Risk Aversion and Tests of Risk Sharing (Site not responding. Last check: 2007-10-06)
		The relative risk aversion (RRA) coefficient of a household whose consumption is close to the subsistence level may be very high.
		However, existing tests in the empirical literature are derived using preferences that exhibit either increasing or constant RRA even when they are applied to data containing low-income households.
		We therefore use a Hyperbolic Absolute Risk Aversion (HARA) utility, which implies increasing, constant, and decreasing RRA as special cases, to test full risk-sharing hypothesis.
	www.nuff.ox.ac.uk /users/doornik/eswc2000/a/1588.html (291 words)

	SSRN-Risk Aversion, Negotiation, and Claims Settlement Strategies by Helen Doerpinghaus, Joan Schmit, Jia Hsing Jason ...
		We examine the optimal claims settlement strategy for a liability insurer negotiating with classes of claimants who differ in risk attitude and negotiating skill.
		Our model demonstrates that a profit-maximizing insurer will be systematically less generous in claims payment to claimants who are more risk averse and who experience greater negotiating costs.
		Following the existing literature we use claimant gender and age to identify classes of claimants with different risk preferences and negotiating costs.
	papers.ssrn.com /soL3/papers.cfm?abstract_id=690121 (323 words)

	SignOnSanDiego.com > News > Richard Louv -- America's dangerous aversion to risk
		Right now, those definitions are up for grabs, so every risk is targeted, particularly when it comes to children.
		A generation is coming to age with an atrophied sense of personal freedom and an expanded waistline.
		In the long term, delayed health problems due to childhood obesity will probably trump the short-term risk of running on the playground.
	www.signonsandiego.com /news/metro/louv/20051206-9999-lz1e6louv.html (804 words)

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