Market risk and Mean-variance efficiency: Difference between pages
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The mean-variance efficiency criterion says that rational investors should always prefer greater average returns and lower risk (measured by lower variances) of returns. | |||
So that, given the choice, we should - and will in theory - always prefer investment portfolios that: | |||
- Maximise the mean return for any given variance; or | |||
- Minimise the variance of returns for any given mean. | |||
== See also == | == See also == | ||
* [[ | * [[Mean]] | ||
* [[ | * [[Variance]] | ||
Revision as of 09:20, 22 August 2013
The mean-variance efficiency criterion says that rational investors should always prefer greater average returns and lower risk (measured by lower variances) of returns.
So that, given the choice, we should - and will in theory - always prefer investment portfolios that:
- Maximise the mean return for any given variance; or
- Minimise the variance of returns for any given mean.
