"Markowitz showed that the variance of the rate of return was a meaningful measure of portfolio risk under a reasonable set of assumptions. He also derived a formula for computing the variance of a portfolio. These formulas for the variance of a portfolio not only indicate the importance of diversifying your investments to reduce the total risk of a portfolio, but also showed how to effectively diversify. Markowitz theory achieved the following: - Markowitz demonstrated that the variance of the rate of return is a meaningful measure of portfolio risk under reasonable assumptions. - Derives the expected rate of return for a portfolio of assets and an expected risk - measure Shows that the variance of the rate of return is a meaningful measure of portfolio risk - Derives the formula for computing the variance of a portfolio, showing how to effectively diversify a portfolio. Source: http://in.docsity.com/en-docs/Markowitz_Portfolio_Theory_-_Security_Analysis_and_Portfolio_Management_-_Solved_Quiz_"
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Current account possibility (MPT) is a hypothesis regarding finance which in turn tries to improve collection expected return for the presumption volume of portfolio risk, or maybe equivalently reduce threat for any presumption higher level of predicted come back, by means of carefully picking out this size of assets.
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