Unformatted text preview: Alternatively, the efficient portfolio is that which provides the lowest degree of risk for any expected return. Portfolio can contain more than two risky assets. When there are more than two risky assets in the portfolio, the feasible set is no longer a line. It will be an area. A portfolio with many risky assets, the upper boundary of the feasible set is called the efficient set . Given two randomly chosen stocks will most probably have different expected returns as well as different standard deviation. The latter represent the statistical properties of stock returns over a given period of time expressed as the probability of deviations from the mean. In our case the mean is the average return expected. We can interpret it as the risk that the expected return will not materialize....
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This note was uploaded on 10/15/2011 for the course FIN 550 taught by Professor Smith during the Spring '11 term at Berklee.
- Spring '11