What did better mean specified by portfolio selection
What did ‘better’ mean specified with Markowitz questioned regarding portfolio selection?
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Markowitz answered a portfolio’s possible future performance in orders of its expected return and also its standard deviation. The last was to be interpreted as its risk. He demonstrated how to optimize a portfolio to provide the maximum expected return for a specified level of risk. That portfolio was said to be ‘efficient.’ This work later won Markowitz a Nobel Prize for Economics although is problematic to use in practice due to the difficulty in measuring the parameters especially, ‘correlation,’ ‘volatility ’and their instability.
Brittney and Kim Wan Sun have successfully launched a successful talent agency, ABC. They expect the firm’s earnings and dividends to grow by 20% annually for the next 10 years and they establish a strong base and to grow at a constant 5% per year thereafter. AB
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