The measure of risk most often associated with the Markowitz portfolio model is the portfolioGroup of answer choicesaverage return.minimum return.variance.range.
Question
The measure of risk most often associated with the Markowitz portfolio model is the portfolioGroup of answer choicesaverage return.minimum return.variance.range.
Solution
The correct answer is "variance."
Explanation:
The Markowitz portfolio model, also known as Modern Portfolio Theory, is a model that aims to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets.
The measure of risk in the Markowitz model is the portfolio variance or, equivalently, the standard deviation. The variance measures the dispersion of the portfolio returns, and a higher variance implies a higher level of risk. Therefore, the measure of risk most often associated with the Markowitz portfolio model is the portfolio variance.
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