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Mean Variance Optimization definition

Since in portfolio theory all investors balance expected return versus expected risk, shouldn't we at least know how that works?


Mean Variance Optimization is the framework for maximizing the reward-to-risk ratio of a portfolo. Mean in the numerator refers to the mean expected return and variance in the denominator refers to a measure of expected variability. MVO is a key takeaway from Modern Portfolio Theory as it is assumed that all investors maximize returns relative to risk. A software program called an optimizer generates weights to securities while maximizing the reward-to-risk ratio.

Synonyms: Mean-Variance, MVO, Mean/Variance Optimization

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Since standard deviation is the square root of variance, you would get similar results if you maximize the mean-to-standard-deviation ratio? | True or False


In a Sentence

Doc:  One MPT assumption is that all investors are MVO  aware.
Doc:  In theory, right? My stockbroker says that almost no one follows MPT.


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Mean Variance Optimization
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portfolio theory
risk reward ratio
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Sharpe Ratio
Modern Portfolio Theory
optimal portfolio