Risk aversion
Risk aversion is the tendency for people to prefer certainty over uncertainty. Thus, the adoption of a risky behavior must be compensated with a significant premium to account for the disutility inherently received from taking the risk.
Relevant Academic Papers
- Dow, J., & da Costa Werlang, S. R. (1992). Uncertainty aversion, risk aversion, and the optimal choice of portfolio. Econometrica: Journal of the Econometric Society, 197-204.