Mean-variance efficiency

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Revision as of 09:20, 22 August 2013 by imported>Doug Williamson (Spacing 22/8/13)
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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