Minimum-variance portfolio

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Minimum-variance portfolio

The portfolio of risky assets with lowest variance.

Minimum-Variance Portfolio

A portfolio of individually risky assets that, when taken together, result in the lowest possible risk level for the rate of expected return. Such a portfolio hedges each investment with an offsetting investment; the individual investor's choice on how much to offset investments depends on the level of risk and expected return he/she is willing to accept. The investments in a minimum variance portfolio are individually riskier than the portfolio as a whole. The name of the term comes from how it is mathematically expressed in Markowitz Portfolio Theory, in which volatility is used as a replacement for risk, and in which less variance in volatility correlates to less risk in an investment.
References in periodicals archive ?
In addition to risk parity, risk-based strategies include minimum variance portfolio theory and maximum diversification.
Next, a multi-objective optimization problem is formulated, where a minimum variance portfolio achieves maximum effect of diversification.
The variance of a minimum variance portfolio p can be obtained by analytically solving Markowitz's mean-variance model (8).
These stocks correspond to the minimum variance portfolio for G = 0 and so the portfolio at this point is less volatile than the other frontiers at the same G = 0 point.
To compute the minimum variance portfolio select the Portfolio worksheet and go to Tools>Solver.
This worksheet contains the information to graph the efficient frontier, capital market line, original portfolio, and minimum variance portfolio.
The minimum variance portfolio is the mixture of risky stocks that reduces risk (standard deviation) to its lowest possible level.
To illustrate this, suppose that some investor chose to invest in the minimum variance portfolio.
The minimum variance portfolio had an average rate of return of 13.
The high return on the S&P 500 combined with its low volatility during this period are major reasons why the minimum variance portfolio has an 80 percent weighting in the U.
818 while the minimum variance portfolio has a coefficient of variation of 0.
portfolio, which is the minimum variance portfolio for the
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