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Efficient Portfolios

Efficient Portfolios M noted above, the first step or the technical aspect of optimal portfolio selection is to determine risk-return opportunities available: to an investor, This is also referred to as the determination of the feasible set of portfolio at the...

Two-Step Optimisation

Two-Step Optimisation This is also termed as the ‘top-down’ approach. It is more structured and preferred by institutional investors, This approach identifies three distinct stages in the selection of an optimal portfolio. The process of portfolio...

One-Step Optimisation

One-Step Optimisation This approach begins with tile delimitation of efficient portfolios having one or more risky assets (securities) and culminates with the capital market line (CML), The CML is a straight line that represents the efficient portfolios that can be...

PORTFOLIO SELECTION

PORTFOLIO SELECTION This Section deals with the selection of the optimal portfolio based on the mean variance model developed by Harry Markowitz. The model/procedure has two parts (i) Technical determination of the set of efficient portfolios from the available...

Markowitz Diversification

Markowitz Diversification In Markowitz diversification, the emphasis shifts from the number of securities to the co-variance among them. In a portfolio or assets/securities that have strong negative co-variance, it is possible to reduce the portfolio risk below the...

Naive Diversification

Naive Diversification Naive diversification means a portfolio consisting of stocks chosen at random. This is not put all your eggs in one basket approach. Intuitively, as  stocks in the portfolio increases, individual fluctuations in asset returns are cancelled out....