Risk aversion is a concept that describes an individual's preference for a less risky outcome over a more risky outcome, when the two have the same expected benefit. For example, a risk-averse individual will prefer $50 for sure, rather than taking a bet with a 50 per cent chance of receiving nothing and an equal chance of receiving $100, although the expected payoff is also $50.
Different people have different levels of risk aversion. A person's risk aversion may also change over his lifetime due to factors such as age, experience, wealth, literacy and cognitive ability.
Already a subscriber? Log in
Read the full story and more at $9.90/month
Get exclusive reports and insights with more than 500 subscriber-only articles every month
ST One Digital
$9.90/month
No contract
ST app access on 1 mobile device
Unlock these benefits
All subscriber-only content on ST app and straitstimes.com
Easy access any time via ST app on 1 mobile device
E-paper with 2-week archive so you won't miss out on content that matters to you
