What is the 'Markowitz Efficient Set'
The Markowitz efficient set is a set of portfolios with returns that are maximized for a given level of risk based on meanvariance portfolio construction. The efficient "solution set" to a given set of meanvariance parameters (a given riskless asset and a given risky basket of assets) can be graphed into what is called the Markowitz efficient frontier.
BREAKING DOWN 'Markowitz Efficient Set'
The Markowitz efficient set is all of the portfolios on the efficient frontier, or those that generate the largest return for a given risk level. The meanvariance and subsequent efficient set theory at one time revolutionized portfolio management, and remains a core lecture in any economist's university years. The theory of meanvariance portfolios lead to the capital asset pricing model, and is still a vital component of professional money management today.

Homogeneous Expectations
An assumption in Markowitz Portfolio Theory that all investors ... 
Harry Markowitz
A Nobel Memorial Prize winning economist who devised the modern ... 
Efficient Frontier
A set of optimal portfolios that offers the highest expected ... 
Mutual Fund Theorem
An investing theory, postulated by Nobel laureate James Tobin, ... 
Efficiency
A level of performance that describes a process that uses the ... 
Price Efficiency
The premise that asset prices are efficient, to the extent that ...

Active Trading
Modern Portfolio Theory: Why It's Still Hip
See why investors today still follow this old set of principles that reduce risk and increase returns through diversification. 
Active Trading
Market Efficiency Basics
Market efficiency theory states that a stockâ€™s price will fully reflect all available and relevant information at any given time. 
Investing Basics
Explaining The Efficient Frontier
Most investment choices involve a tradeoff between risk and reward. The "Efficient Frontier" is a modern portfolio theory tool that shows investors the best possible return they can expect from ... 
Fundamental Analysis
How Investment Risk Is Quantified
FInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk. 
Fundamental Analysis
The History Of The Modern Portfolio
Learn how the writings of John Burr Williams and Harry Markowitz led to the creation of the investment portfolio. 
Fundamental Analysis
Understanding Modern Portfolio Theory
Modern portfolio theory describes ways of diversifying assets in a portfolio in order to maximize the expected return given the ownerâ€™s risk tolerance. 
Economics
Explaining Efficiency
Efficiency refers to the ability to make something with the fewest resources possible. 
Economics
Explaining Economic Efficiency
Economic efficiency is achieved when every resource is optimally allocated to minimize waste and best serve each person in that economy. 
Professionals
The Workings Of Equity Portfolio Management
Achieve analytical efficiency by applying your evaluation to a key set of stocks. 
Mutual Funds & ETFs
Strategies For Determining The Market's True Worth
Learn the strengths and weaknesses of passive and active management when trying to uncover the overall market's worth.

Why is risk return tradeoff important in designing a portfolio?
Learn how the risk return tradeoff is used in the construction of portfolios, and how modern portfolio theory seeks to diversify ... Read Answer >> 
Which of the following is the most true regarding the type of assets found along ...
The correct answer is b. The efficient frontier is comprised mainly of portfolios that contain several imperfectly correlated ... Read Answer >> 
Does a high efficiency ratio mean that the company is profitable?
Understand the variety of efficiency ratios and why a high efficiency ratio does not necessarily mean a company is operating ... Read Answer >> 
How do investment advisors calculate how much diversification their portfolios need?
Learn how modern portfolio theory (MPT) can help determine a diversified mix of assets for inclusion in a portfolio that ... Read Answer >> 
Which financial ratios are considered to be efficiency ratios?
Learn about efficiency ratios, what financial ratios are considered efficiency ratios, and how to calculate three different ... Read Answer >> 
What is an efficient market and how does it affect individual investors?
When people talk about market efficiency they are referring to the degree to which the aggregate decisions of all the market's ... Read Answer >>