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7 the feasible or attainable figure set and the

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Unformatted text preview: lation between returns Combines securities that have negative (or low­ positive) correlations between each other’s rates of return Key Aspects of MPT: Efficient Frontier Efficient Efficient Frontier – The leftmost boundary of the feasible set of portfolios that include all efficient portfolios: those providing the best attainable tradeoff between risk and return – Portfolios that fall to the right of the efficient frontier are not desirable because their risk return tradeoffs are inferior – Portfolios that fall to the left of the efficient frontier are not available for investments Figure 5.7 The Feasible or Attainable Figure Set and the Efficient Frontier Set Global minimum variance portfolio Key Aspects of MPT: Portfolio Betas Portfolio Portfolio Beta – The beta of a portfolio; calculated as the weighted average of the betas of the individual assets the portfolio includes – To earn more return, one must bear more risk – Only nondiversifiable risk (relevant risk) provides a posi...
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