CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

If world events cause investors to become more risk-averse, we would expect the market risk premium to increase. True or False?
Correct Answer: True

User Contributed Comments 4

User Comment
Juhee Any one explanation? isn't risk-averse related to investors' nature?
reganbaha In a risk-averse setting, investors will require a higher return in order to participate in more risky investments, hence the risk premium would have to rise to entice these investors
ArainNow Higher premiums entice investors to take risks.
jonan203 take a look at the markets today, most of the volume in equity markets is attributed to algorithms and high frequency traders...mom and pops a leaving the markets in droves since the required risk premium is non existent and will only return if said premium increases for the given level of risk one must take to invest in equities.
You need to log in first to add your comment.