Chapter 6
Mean-Variance Portfolio Analysis
6.1 Introduction
This chapter considers statistical characteristics of sets of assets, especially their means, variances, and correlations. . A set of assets held by an investor is called the investor’s portfolio. The subject of this and the next chapter is portfolio analysis. This means the attempt to optimize the combination of assets, based on available data. Portfolios of m risky stocks are considered, and a combined portfolio of m risky stocks and a risk-free asset is considered.
A section on matrices and vectors is included in Appendix 6A and Appendix A at the end of the book. These are optional; however, it is recommended that persons interested in statistical finance become acquainted with vectors ...
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