Portfolio theory tends to define risky investments in terms of just two factors: expected returns and variance

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Portfolio theory tends to define risky investments in terms of just two factors: expected returns and variance (or standard deviation) of those expected returns.

What assumptions need to be made about investors and the expected investment returns (one assumption in each case) to justify this ‘two-factor’ approach? Are these assumptions justified in real life?

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Business Finance

ISBN: 9781292134406

11th Edition

Authors: Eddie McLaney

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