Corner portfolio
Corner portfolio
In a two stocks
portfolio, the minimum attainable risk (variance) and the lowest return would
be the corner portfolio. As the number of stocks increases in a portfolio, the
corner portfolio would be the one with lowest return and risk combination.
Corner portfolio
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In the above
diagram, AB shows the risk-return combination of several portfolios. Each
number indicates the number of stocks in the portfolio. When the number of
stock increases, the risk and return decline. Tracing the AB line shows the
corner portfolio. An efficient frontier may have one or two security portfolio
at the low or high extremes, if the percentages of allocations to stocks are
free to take any value
.
.
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