Texonom
Texonom
/
Society
Society
/Social Science/
Economics
Economics
/
Investment
Investment
/Investing Strategy/Portfolio Investment/
Modern portfolio theory
Search

Modern portfolio theory

Creator
Creator
Seonglae Cho
Created
Created
2024 Oct 13 0:20
Editor
Editor
Seonglae Cho
Edited
Edited
2024 Oct 13 0:22
Refs
Refs
Lyapunov function
 
 
 
 
 
Modern portfolio theory
Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is less risky than owning only one type. Its key insight is that an asset's risk and return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return. The variance of return (or its transformation, the standard deviation) is used as a measure of risk, because it is tractable when assets are combined into portfolios.[1] Often, the historical variance and covariance of returns is used as a proxy for the forward-looking versions of these quantities,[2] but other, more sophisticated methods are available.[3]
Modern portfolio theory
https://en.wikipedia.org/wiki/Modern_portfolio_theory
 
 
 

Recommendations

Texonom
Texonom
/
Society
Society
/Social Science/
Economics
Economics
/
Investment
Investment
/Investing Strategy/Portfolio Investment/
Modern portfolio theory
Copyright Seonglae Cho