Mean Variance Portfolio Allocation

Cheng Hsiao and Shin-Huei Wang
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Shin-Huei Wang: University of Southern California

Chapter 20 in Encyclopedia of Finance, 2022, pp 743-752 from Springer

Abstract: Abstract The basic rules of balancing the expected return on an investment against its contribution to portfolio risk are surveyed. The related concept of Capital Asset Pricing Model asserting that the expected return of an asset must be linearly related to the covariance of its return with the return of the market portfolio if the market is efficient and its statistical tests in terms of Arbitraging Price Theory are also surveyed. The intertemporal generalization and issues of estimation errors and portfolio choice are discussed as well.

Keywords: Arbitrage pricing theory; Capital asset pricing model; Covariance; Errors of estimation; Mean–variance efficiency; Minimum variance portfolio; Sharpe ratio; Value at risk; Volatility; Zero-beta portfolio (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-91231-4_20

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DOI: 10.1007/978-3-030-91231-4_20

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