Does mental accounting bias always imply lower willingness to take risk?

Does mental accounting bias always imply lower willingness to take risk?

Though I don’t know for certain, I feel that it would. My rationale is that those suffering from the mental accounting bias will perceive any potential risk as higher than those that consider their wealth to be fungible. The latter group will evaluate the covariance of the asset(s) being considered with their whole portfolio but the former group will only evaluate them on a stand-alone basis or as part of a smaller “sub-portfolio” (i.e. short-term spending, retirement, college savings, etc.).

Thank you for this answer

I agree. Mental accounting leads to less optimal asset allocation due to failure to consider correlation btw. asset classes (layers).

However, I read an explanation for a problem, which states that the investor (who turns to be independent individualist) carefully analysis investment opportunities (which seems consistent with independ. individualist beh. type) and his attitude to create different layers (one more conservative for education, living expenses etc and one more agressive for secondary goals) is an indicator of his understanding of risk/return framework and above avarage willingness to take risk.

This is Morning Session, Exam 3, Volume 2, Kaplan 2013 / Question 1. - B.

The explanation says that the investor acts more like an institution by creating layered portfolio.

In my view, the explanation is flawed.