Efficient Asset Or Efficient Portfolio Financial Glossary

What is it? An asset or portfolio of assets that earns the maximum possible return for its given level of risk. An asset or a portfolio of assets is considered to be efficient if no other asset or portfolio of assets offers a higher expected return with the same (or lower) risk or offers a lower risk with the same (or higher) expected return. This concept is part of a financial explanation sometimes called the Markowitz Portfolio Model or the Efficient Frontier Theory. The efficient portfolio is defined mathematically based upon the expected returns, the standard deviation of returns, and the covariance of returns for the portfolio.

Finance Term Definition Added By: Rebecca

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