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  2. Modern portfolio theory - Wikipedia

    en.wikipedia.org/wiki/Modern_portfolio_theory

    The return - standard deviation space is sometimes called the space of 'expected return vs risk'. Every possible combination of risky assets, can be plotted in this risk-expected return space, and the collection of all such possible portfolios defines a region in this space. The left boundary of this region is hyperbolic, [8] and the upper part ...

  3. Markowitz model - Wikipedia

    en.wikipedia.org/wiki/Markowitz_model

    R M = return on the market portfolio σ M = standard deviation of the market portfolio σ P = standard deviation of portfolio (R M – I RF)/σ M is the slope of CML. (R M – I RF) is a measure of the risk premium, or the reward for holding risky portfolio instead of risk-free portfolio. σ M is the risk of the market portfolio. Therefore, the ...

  4. Portfolio optimization - Wikipedia

    en.wikipedia.org/wiki/Portfolio_optimization

    Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective.The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.

  5. Calculating the Expected Return of a Portfolio

    www.aol.com/news/calculating-expected-return...

    An investment’s “expected return” is a critical number, but in theory it is fairly simple: It is the total amount of money you can expect to gain or lose on an investment with a predictable ...

  6. Efficient frontier - Wikipedia

    en.wikipedia.org/wiki/Efficient_frontier

    In modern portfolio theory, the efficient frontier (or portfolio frontier) is an investment portfolio which occupies the "efficient" parts of the riskreturn spectrum. Formally, it is the set of portfolios which satisfy the condition that no other portfolio exists with a higher expected return but with the same standard deviation of return (i ...

  7. Capital asset pricing model - Wikipedia

    en.wikipedia.org/wiki/Capital_asset_pricing_model

    The CAPM is a model for pricing an individual security or portfolio. For individual securities, we make use of the security market line (SML) and its relation to expected return and systematic risk (beta) to show how the market must price individual securities in relation to their security risk class.

  8. Portfolio (finance) - Wikipedia

    en.wikipedia.org/wiki/Portfolio_(finance)

    It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives. The monetary value of each asset may influence the risk/reward ratio of the portfolio. When determining asset allocation, the aim is to maximise the expected return and minimise the risk.

  9. Fama–French three-factor model - Wikipedia

    en.wikipedia.org/wiki/Fama–French_three-factor...

    Here r is the portfolio's expected rate of return, R f is the risk-free return rate, and R m is the return of the market portfolio. The "three factor" β is analogous to the classical β but not equal to it, since there are now two additional factors to do some of the work.

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