A theoretical collection of optimal portfolios based on risk/return trade- offs. Efficient frontiers are a part of what is called Modern Portfolio Theory. Electronic Quotation Service (EQS): See: Pink Sheets.

A graph showing the best possible return against lowest possible risk.... more on: Efficient frontier

The point at which a portfolio is diversified in such a way as to provide the maximum possible return with the least amount of risk.

The line on a risk-reward graph comprised of all efficient portfolios.

Feasible combinations of expected profit and risk which, for each level of risk, have maximum profit.

The graphical representation of the best possible tradeoffs that exist between risk and return. In an efficient frontier, securities or portfolios are ranked in order of expected risk or return. Generally, investors select a portfolio based on their risk tolerance.

A continuum of portfolios that have the highest expected returns for their given levels of standard deviation plotted in dimensions of expected return and standard deviation. An important component of the Capital Asset Pricing Model.

(go to top) A curve which describes the optimal combination of a portfolio of assets to achieve given levels of return, with the least amount of risk.

The return profile of a portfolio as the amount invested in different asset classes changes. The path of the efficient frontier allows investors to see which mix generates the highest return for a given level of risk and which would generate the lowest risk for a given level of return.

The combination of securities that maximizes the expected return for any level of expected risk, or that minimizes expected risk for any level of expected return.

The set of possible portfolios with the highest return for any given level of risk. In a scatter plot of portfolio returns against their standard deviations, these portfolios describe a line that sets the upper boundary of the scatter.

a set of portfolios that each maximize expected return for a given level of risk. law of one price The notion that, if two assets have identical cash flows, they should have the same market value.

In mean/variance analysis, the curve where the set of efficient portfolios lie. That is, those portfolios of risky assets which have the highest level of expected return for their level of risk.

The combinations of investments that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return.

A statistical result from the analysis of the risk and return for a given set of assets that indicates the balance of assets that may, under certain assumptions, achieve the best return for a given level of risk.

Refers to the maximum return you can expect for any given level of risk, based on historical returns of major asset classes.

The line on a chart that marks out the best combination of risk and return available to investors in a particular market.

A chart that highlights the highest expected level of return for a given level of risk.

An efficient frontier is a line of Pareto optimal portfolios created from a risk-return graph that plots standard deviation (risk) on the x-axis and return on the y-axis. These optimal portfolios along the curve have the highest return for a given level of risk or the lowest risk for a given level of return. Points above the curve are theoretically impossible whereas points below the curve are not efficient.

A theoretical set of portfolios offering optimal risk-reward tradeoffs.