PortfolioTheorien

PortfolioTheorien, also known as Portfolio Theory, refers to a set of financial economics models that aim to explain how investors can construct portfolios to maximize expected returns for a given level of risk or minimize risk for a given level of expected return. The foundational concept was laid out by Harry Markowitz in his seminal 1952 paper, "Portfolio Selection."

The core idea of Portfolio Theory is diversification. By combining assets that are not perfectly correlated, investors can reduce the overall risk of their portfolio without necessarily sacrificing expected return. This is because the losses in one asset can be offset by gains in another. The theory introduces the concept of the efficient frontier, which represents the set of optimal portfolios that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.

Key elements of Portfolio Theory include expected return, risk (typically measured by standard deviation or variance), and covariance between assets. Investors are assumed to be rational and risk-averse, meaning they prefer higher returns and lower risk. The theory is a cornerstone of modern finance and has significantly influenced investment management practices, leading to the development of sophisticated tools and strategies for asset allocation. While the original Markowitz model has been extended and refined, its fundamental principles remain highly influential.