Portfolio separation theorem

Portfolio separation theorem

Theory that an investor's choice of a risky investment portfolio is separate from his attitude towards risk. Related: Fisher's separation theorem.

Portfolio Separation Theorem

An economic theory stating that the investment decisions of a firm are independent from the firm's owner's wishes. The Portfolio Separation Theorem states that the productive value of a firm's management neither affects nor is affected by the owner's business decisions. As a result, the performance of a firm's investments has no relation to how they are financed, whether by stock, debt, or cash. The theorem was devised by economist Irving Fisher. See also: Irrelevance result.
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The proposed model may also be viewed as a special case of the k-fund portfolio separation theorem developed by Ingersoll (1987).