Portfolio Theory

Minimum-Variance Portfolio

Definition

What is Minimum-Variance Portfolio?

The portfolioThe complete collection of investments owned by an investor or managed under one mandate. with the lowest expected varianceThe average squared deviation of returns from their mean. among the available combinations.

Example in practice

How This Looks in Practice

Optimisation identifies the asset weights that minimise volatilityThe degree and frequency of price or return fluctuations..

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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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