A Study on Markowitz Portfolio Theory

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Table of Contents Page# Abstract ------------------------------------------------------------------------------- 2 Markowitz Portfolio Theory -------------------------------------------------------- 3 2.1. Assumptions of Portfolio Theory ---------------------------------------------- 3 Alternative Measures of Risk -------------------------------------------------------- 4 3.1. Expected Rate of Return --------------------------------------------------------- 4 3.2. Variance (Standard Deviation) Of Returns for a Single Investment ------ 5 3.3. Variance (Standard Deviation) of Returns for a Portfolio ------------------- 5 3.3.1. Covariance -------------------------------------------------------------- 5 3.3.2. Correlation -------------------------------------------------------------- 6 3.4. Standard Deviation of a Portfolio ----------------------------------------------- 7 Efficient Frontier ----------------------------------------------------------------------- 10 Efficient Frontier and Investor Utility ----------------------------------------------- 10 Conclusion ------------------------------------------------------------------------------ 11 References ------------------------------------------------------------------------------ 12 Appendices ----------------------------------------------------------------------------- 13 Abstract The portfolio model presented by Harry Markowitz derives the formula to calculate the expected rate of return for a
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