Portfolio expected return and variance

A theory of portfolio analysis that considers relationships between asset movements as well as individual asset risks.

Theory · Accounting and finance

Core concepts

• Expected return: assumptions about future returns
• Variance and covariance: variability and the degree of movement together
• Efficient combinations: compare risk and expected-return alternatives

Application

When reviewing assets or exposures, examine concentration in common risk factors and the effects of estimation assumptions.

Limitations and jurisdiction

Historical correlations are not guaranteed to persist. Variance does not describe every risk, and diversification does not eliminate losses.

Editorial perspectives

• Diversify risk: reduce concentrated exposure to particular factors.
• Seek returns: record additional risk and estimation uncertainty together.

Sources

Harry Markowitz · The Journal of Finance · 1952, DOI 10.1111/j.1540-6261.1952.tb01525.x

Context: General financial theory

Source checked: 2026-10-07

Independent editorial summary and source link; the original text is not republished.

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Translation status

Editorial English translation of the Korean edition. No professional translation or occupational expert review has been completed. Translation does not change the source jurisdiction.

Translation prepared: 2026-10-09 · Source fingerprint: kb-0af7e924fa6c2688

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