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Encyclopedia of Finance pp 457–463Cite as

Mean variance portfolio allocation

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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.

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Author information

Authors and Affiliations

  1. University of Southern California, Los Angeles, USA

    Cheng Hsiao

  2. University of Southern California, Los Angeles, USA

    Shin-Huei Wang

Authors
  1. Cheng Hsiao
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  2. Shin-Huei Wang
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Editor information

Editors and Affiliations

  1. Rutgers University, New Brunswick/Piscataway, USA

    Cheng-Few Lee

  2. San Francisco State University, San Francisco, USA

    Alice C. Lee

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© 2006 Springer Science+Business Media, Inc.

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Hsiao, C., Wang, SH. (2006). Mean variance portfolio allocation. In: Lee, CF., Lee, A.C. (eds) Encyclopedia of Finance. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-26336-6_45

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  • DOI: https://doi.org/10.1007/978-0-387-26336-6_45

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-0-387-26284-0

  • Online ISBN: 978-0-387-26336-6

  • eBook Packages: Business and Economics

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