Portfolio Theory

Global Minimum-Variance Portfolio

Definition

What is Global Minimum-Variance Portfolio?

The single portfolioThe complete collection of investments owned by an investor or managed under one mandate. with the lowest varianceThe average squared deviation of returns from their mean. on the entire feasible set.

Example in practice

How This Looks in Practice

The global minimum-variance point sits at the far-left edge of the efficient frontierThe set of portfolios offering the highest expected return for each level of risk under stated assumptions..

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Related Terms

Portfolio Theory

Capital Asset Pricing Model

A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.

Portfolio Theory

Security Market Line

A line showing the CAPM relationship between expected return and beta.

Portfolio Theory

Efficient Frontier

The set of portfolios offering the highest expected return for each level of risk under stated assumptions.

Fraud & Scams

Ponzi Scheme

A fraud that pays earlier participants using money from newer participants rather than genuine investment profits.

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