List Two Ways a Risk Adverse Person May Attempt to Reduce

question 38

Essay

List two ways a risk adverse person may attempt to reduce risks.

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Definitions:

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices.

Semistrong Efficient

A term from the Efficient Market Hypothesis indicating that all public information is reflected in stock prices, along with all historical data.

SML

The Security Market Line, a graphical representation of the capital asset pricing model (CAPM), showing the expected return of investments as a function of their beta or systemic risk.

Expected Return

The anticipated profit or loss from an investment over a specified period, factoring in all possible scenarios.