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TRUE OR FALSE? Someone who is risk averse has a general dislike for risk and a preference for certainty. If risk aversion exists in the
TRUE OR FALSE?
Someone who is risk averse has a general dislike for risk and a preference for certainty. If risk aversion exists in the market, then investors in general are willing to accept somewhat lower returns on less risky securities. Different investors have different degrees of risk aversion, and the end result is that investors with greater risk aversion tend to hold securities with greater risk (and therefore a higher anticipated return) than investors who have more tolerance for risk.
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