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journal article Increased Risk Aversion and Risky InvestmentThe Journal of Risk and Insurance Vol. 60, No. 3 (Sep., 1993) , pp. 494-501 (8 pages) Published By: American Risk and Insurance Association https://doi.org/10.2307/253040 https://www.jstor.org/stable/253040 Read and download Log in through your school or library Alternate access options For independent researchers Read Online Read 100 articles/month free Subscribe to JPASS Unlimited reading + 10 downloads Purchase article $9.00 - Download now and later Abstract This article investigates the relationship between the size of investment in a risky asset and the degree of risk aversion. The necessary and sufficient conditions are established that permit the prediction of whether agents with differing degrees of risk aversion will increase or decrease investment in the risky asset. It shows, in particular, that when the marginal return to investment decreases (increases) with an improvement in the state of nature, greater risk aversion will induce higher (lower) investment. Journal Information The Journal of Risk and Insurance publishes rigorous, original research in insurance economics and risk management. This includes the following areas of specialization: (1) industrial organization of insurance markets; (2) management of risks in the private and public sectors; (3) insurance finance, financial pricing, financial management; (4) economics of employee benefits, pension plans, and social insurance; (5) utility theory, demand for insurance, moral hazard, and adverse selection; (6) insurance regulation; (7) actuarial and statistical methodology; and (8) economics of insurance institutions. Both theoretical and empirical submissions are encouraged. Empirical work should provide tests of hypotheses based on sound theoretical foundations. JSTOR provides a digital archive of the print version of The Journal of Risk and Insurance. The electronic version of The Journal of Risk and Insurance is available at http://www.blackwell-synergy.com/servlet/useragent?func=showIssues&code;=jori. Authorized users may be able to access the full text articles at this site. Publisher Information The American Risk and Insurance Association (ARIA) is a worldwide group of academic, professional, and regulatory leaders in insurance, risk management, and related areas, joined together to advance the study and understanding of the field. Founded in 1932, ARIA emphasizes research relevant to the operational concerns and functions of insurance and risk management professionals and provides resources, information, and support on important insurance and risk management issues. Two main goals of the organization are 1) to expand and improve academic instruction of risk management and insurance, and, 2) to encourage research on all significant aspects of risk management and insurance. Rights & Usage This item is part of a JSTOR Collection. Read Online (Free) relies on page scans, which are not currently available to screen readers. To access this article, please contact JSTOR User Support . We'll provide a PDF copy for your screen reader. With a personal account, you can read up to 100 articles each month for free. Get StartedAlready have an account? Log in Monthly Plan
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journal article An Empirical Analysis of the Risk-Return Preferences of Individual InvestorsThe Journal of Financial and Quantitative Analysis Vol. 12, No. 3 (Sep., 1977) , pp. 377-389 (13 pages) Published By: Cambridge University Press https://doi.org/10.2307/2330541 https://www.jstor.org/stable/2330541 Read and download Log in through your school or library Alternate access options For independent researchers Read Online Read 100 articles/month free Subscribe to JPASS Unlimited reading + 10 downloads Purchase article $34.00 - Download now and later Journal Information The Journal of Financial and Quantitative Analysis (JFQA) is published bimonthly in February, April, June, August, October, and December by the Michael G. Foster School of Business at the University of Washington in cooperation with the Arizona State University W. P. Carey School of Business and University of North Carolina at Chapel Hill Kenan-Flagler Business School. The JFQA publishes theoretical and empirical research in financial economics. Topics include corporate finance, investments, capital and security markets, and quantitative methods of particular relevance to financial researchers. Publisher Information Cambridge University Press (www.cambridge.org) is the publishing division of the University of Cambridge, one of the world’s leading research institutions and winner of 81 Nobel Prizes. Cambridge University Press is committed by its charter to disseminate knowledge as widely as possible across the globe. It publishes over 2,500 books a year for distribution in more than 200 countries. Cambridge Journals publishes over 250 peer-reviewed academic journals across a wide range of subject areas, in print and online. Many of these journals are the leading academic publications in their fields and together they form one of the most valuable and comprehensive bodies of research available today. For more information, visit http://journals.cambridge.org. What happens to return when risk increases?The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns.
What is a riskRisk-seeking refers to an individual who is willing to accept greater economic uncertainty in exchange for the potential of higher returns. Risk-seeking confers a high degree of risk tolerance, or the amount of potential losses an investor is willing to accept.
Which is least likely A for the riskFor the risk-averse manager, the required return decreases for an increase in risk. For the risk-indifferent manager, no change in return would be required for an increase in risk. Most managers are risk-averse, since for a given increase in risk they require an increase in return.
What should the investor do if he is riskRisk neutral measure is the probability that an investor is willing to invest for an expected value; however, they do not give much weightage to risk while looking for gains. Instead, such investors invest and adjust the risks against future potential returns, which determines an asset's present value.
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For a risk-seeking investor, no increase in return would be required for an increase in risk.
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