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Efficient portfolio |
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Definition of Efficient portfolioEfficient portfolioA portfolio that provides the greatest expected return for a given level of risk (i.e. standard
Related Terms:Markowitz efficient portfolioAlso called a mean-variance efficient portfolio, a portfolio that has the highest Mean-variance efficient portfolioRelated: Markowitz efficient portfolio Markowitz efficient set of portfoliosThe collection of all efficient portfolios, graphically referred to as the Homogenous expectations assumptionAn assumption of Markowitz portfolio construction that investors Markowitz efficient frontierThe graphical depiction of the Markowitz efficient set of portfolios Optimal portfolioAn efficient portfolio most preferred by an investor because its risk/reward characteristics Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a Beta coefficientA measurement of the extent to which the returns on a given stock move with stock market. coefficient of correlationa measure of dispersion that indicates the degree of relative association existing between two variables Coefficient of determinationA measure of the goodness of fit of the relationship between the dependent and coefficient of determinationa measure of dispersion that coefficient of variationa measure of risk used when the standard deviations for multiple projects are approximately Complete portfolioThe entire portfolio, including risky and risk-free assets. Correlation coefficientA standardized statistical measure of the dependence of two random variables, Correlation CoefficientA measure of the tendency of two variables to change values Correlation coefficientA statistic in which the covariance is scaled to a Dedicating a portfolioRelated: cash flow matching. Efficient capital marketA market in which new information is very quickly reflected accurately in share efficient capital marketsFinancial markets in which security prices rapidly reflect all relevant information about asset values. Efficient diversificationThe organizing principle of modern portfolio theory, which maintains that any riskaverse Efficient frontierThe combinations of securities portfolios that maximize expected return for any level of Efficient frontierA graph representing a set of portfolios that maximizes Efficient Market HypothesisIn general the hypothesis states that all relevant information is fully and Efficient Markets HypothesisThe hypothesis that securities are typically in equilibrium--that they are fairly priced in the sense that the price reflects all publicly available information on the security. Excess return on the market portfolioThe difference between the return on the market portfolio and the Factor portfolioA well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of Feasible portfolioA portfolio that an investor can construct given the assets available. Feasible set of portfoliosThe collection of all feasible portfolios. Hedged portfolioA portfolio consisting of the long position in the stock and the short position in the call Index Portfolio Rebalancing Service (IPRS)Index portfolio Rebalancing Service (IPRS) is a comprehensive investment service that can help increase potential returns while reducing volatility. Several portfolios are available, each with its own strategic balance of Index Funds. IPRS maintains your personal asset allocation by monitoring and rebalancing your portfolio semi-annually. Information Coefficient (IC)The correlation between predicted and actual stock returns, sometimes used to input-output coefficienta number (prefaced as a multiplier Internally efficient marketOperationally efficient market. Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Market portfolioA portfolio consisting of all assets available to investors, with each asset held -in market portfolioportfolio of all assets in the economy. In practice a broad stock market index, such as the Standard & Poor's Composite, is used to represent the market. Market PortfolioThe total of all investment opportunities available to the investor. Minimum-variance portfolioThe portfolio of risky assets with lowest variance. Modern portfolio theoryPrinciples underlying the analysis and evaluation of rational portfolio choices Normal portfolioA customized benchmark that includes all the securities from which a manager normally Operationally efficient marketAlso called an internally efficient market, one in which investors can obtain Passive portfolioA market index portfolio. Passive portfolio strategyA strategy that involves minimal expectational input, and instead relies on PortfolioA collection of investments, real and/or financial. PortfolioA collection of securities and investments held by an investor Portfolio DiversificationSee diversification Portfolio insuranceA strategy using a leveraged portfolio in the underlying stock to create a synthetic put Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the Portfolio managementRelated: Investment management Portfolio managerRelated: Investment manager Portfolio opportunity setThe expected return/standard deviation pairs of all portfolios that can be Portfolio separation theoremAn investor's choice of a risky investment portfolio is separate from his Portfolio turnover rateFor an investment company, an annualized rate found by dividing the lesser of Portfolio varianceWeighted sum of the covariance and variances of the assets in a portfolio. Portfolio WeightThe percentage of a total portfolio represented by a single specific Replicating portfolioA portfolio constructed to match an index or benchmark. Structured portfolio strategyA strategy in which a portfolio is designed to achieve the performance of some Tilted portfolioAn indexing strategy that is linked to active management through the emphasis of a Weighted average portfolio yieldThe weighted average of the yield of all the bonds in a portfolio. Well diversified portfolioA portfolio spread out over many securities in such a way that the weight in any Zero-beta portfolioA portfolio constructed to represent the risk-free asset, that is, having a beta of zero. Zero-investment portfolioA portfolio of zero net value established by buying and shorting component Markowitz modelA model for selecting an optimum investment portfolio,
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