From the course: Behavioral Finance Foundations

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Risk aversion and investing

Risk aversion and investing

From the course: Behavioral Finance Foundations

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Risk aversion and investing

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- [Instructor] Let's dig into the idea of risk aversion a little more and look at a practical real-world example in the stock market. Now, remember, risk aversion is just the idea that most people try and avoid uncertainty. All else equal, we'd rather have a steady $50,000 a year salary rather than $25,000 one year and $75,000 the next. People don't like that rollercoaster ride. Now, to look at a real-world example, I'm going to look at two stocks. The first of these stocks is Roku. Now, Roku's had a pretty good run over the last year. A year ago, Roku's stock price was $72.45. At present, Roku's trading for about 107, $108 per share. Not bad, all things considered. You went from $72 to $108 per share. But look what happened along the way. It's been a pretty rough ride, a pretty volatile ride. Roku went from 70 to 30 by the end of 2018. Then in fits and starts, it rose along the way, getting up to a high price of 170…

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