Inefficient portfolio

Inefficient portfolio

Group of assets dominated by at least one other portfolio under the mean variance rule. For example, if A has both lower return and higher volatility than B, we say A is dominated by B.

Inefficient Portfolio

A portfolio that provides too low a return for the risk. That is, an inefficient portfolio has taken on so much risk that the return is not worth the effort. In Markowitz portfolio theory, an inefficient portfolio is graphically represented as any portfolio that does not follow the efficient frontier, or the set of portfolios that provide the highest return at each different level of risk.
References in periodicals archive ?
Accordingly, there is not a single [[sigma].sub.A], for which the capital requirements induce the insurer to select an inefficient portfolio over the corresponding efficient one.
Consequently, the insurer is forced to select the inefficient portfolio in the short run.
Furthermore, we systematically select inefficient portfolios and assess their admissibility, too.
Below we calculate the market risk capital requirements for a systematically selected batch of inefficient portfolios and assess their admissibility, too.
Third, efficient portfolios are not systematically preferred to inefficient portfolios, meaning that some companies may need to expose themselves to a higher than necessary degree of market risk to earn their costs of capital.
Arnott and Wagner [3] find that ignoring transaction costs often results in an inefficient portfolio in practice.
On the other hand, for an SSD inefficient portfolio with respect to [W.sub.M], the Kuosmanen necessary test (7) identifies a dominating portfolio by solving asymptotically two-times smaller linear program than the Kopa-Chovanec test.
For SSD inefficient portfolios, several SSD portfolio inefficiency measures were introduced in [24], [11] and [8].
The company firmly believes that the most economical way of adding new electricity generation capacity is by repowering the aging and inefficient portfolio of existing power plants and by moving to gas power generation and renewable energy.
And the managers who were invested the most in their home states ended up with the most inefficient portfolios. While the hometown investments didn't necessarily underperform, the overweighting can lead to a portfolio that is poorly diversified, and too susceptible to economic problems affecting a single geographic area.
Improperly chosen risk weights induce banks to select inefficient portfolios and to undertake regulatory arbitrage activities.
Both the 100 percent UK portfolio and the diversified portfolio producing 10.07 percent are actually inefficient portfolios (as are the portfolios with eight and six percent rates of return).