AGE AND ECONOMIC CONDITIONS OF THE INVESTOR AFFECTS THE RISK AVERSION OF THE INVESTOR. EXPLAIN THIS...

AGE AND ECONOMIC CONDITIONS OF THE INVESTOR AFFECTS THE RISK AVERSION OF THE INVESTOR. EXPLAIN THIS STATEMENT

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Yes it is true in fact that Age and Economic conditions of Investors affects the risk aversion of the Investor because age and the stage of life cycle of investor to a great extent affect the risk aversion for example if a newly graduate person got a job so he will have a long time period for wealth creation and he can take much of risk to accumulate wealth while a person in the mid of its life cycle or at the age of retirement when his sources of income has come to an end and no period is there to accumulate the wealth, in this case he would be avoiding risk and will investment in securities which are risk free.

In the same way economic conditions also affect the degree of risk aversion, as a person with good and sound financial position can take high degree of risk while a person with limited source of income with many liabilities would be more risk averse in comparison of a wealthy individual. Apart from this many other economic factors like nature of income, financial soundness, level of financial liabilities also affect the level of risk aversion.

jeff jeffy answered 1 year ago

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