Question

One justification often given for the utilization of a variety of conservatism factors in risk analy-ses is that society is risk-averse, so that we should be conservative. Can you identify any flawsin this reasoning?

Answer 1

Conservation refers to the dislike of change and uncertainty, Aversion to risk, or Lack of Ambition. Investors typically fall into three categories of risk tolerance namely aggressive (Those investors who are risk tolerant), Conservation(Those Investors who are risk Averse), Or Moderate (Those investors who are some where in between) The more conservation the society is the less risk The Investor would take, And the less potentia will have to earn a high return (Through Investors also less likely to lose on the Investment). Investors have to be very Cautions Information things because the ignorance of the nature of society would likely to blunder in to the bad state (Or at least a worse one) if the Investor try to interfere will the present order.