Efficient vs Inefficient Portfolios

This video discusses the difference between an efficient portfolio and an inefficient portfolio.

A portfolio is inefficient if there is another portfolio that has a higher expected return without having higher risk (volatility). For example, let's say Portfolio A has an expected return of 29% and Portfolio B has an expected return of 27%, and that both Portfolio A and Portfolio B have a volatility of 20%. In this example, Portfolio B is inefficient because there is another portfolio with a higher expected return that does not have higher risk (Portfolio A).

If a portfolio is efficient, this means you could not find another portfolio with a higher expected return and the same or lower volatility.

A rational investor would always rule out inefficient portfolios; if they can earn a higher return without bearing additional risk, they will do so.—
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[bell]

You are a life saver to Accounting and Finance students. Thank you

[mileswales]

Simple and yet effective! Thank you very much for your contribution. Your whole channel is a goldmine. Also this tutorial is for everybody (engineering background)

[cazung]

Very good explanation. Thankyou for your efforts for teaching. Thankyou keep up the good work Profesor

[hof]

Hi Michael, Could you explain how you get a minimum variance frontier with a portfolio that has more than two stocks? Thanks!

[susanable]

no one ever explains how to calculate the combinations. Pretty sure everyone has seen this before, but no one can do it.

[ajaxsid]

How to get rid of spanish auto subtitles.