Evaluates the reduction of nonsystematic or diversifiable risks through the selection of securities or other instruments into a composite holding or efficient portfolio. This efficiency means that a portfolio would offer lower risks or more stable returns for a targeted return level. Instruments that have independent returns lower nonsystematic risks. Also, instruments that are inversely related on a return basis reduce the diversifiable risks. The basic theory assumes that returns are independent, investor expectations are homogeneous, and that the normalized probability distributions are stable.
Barry Goldsmith
| APA | Barry Goldsmith. (2010). portfolio theory. Retrieved September 24, 2026, from http://smartdefine.org/portfolio_theory/definitions/1160770 |
| Chicago | Barry Goldsmith. 2010. "portfolio theory" http://smartdefine.org/portfolio_theory/definitions/1160770 (accessed September 24, 2026). |
| Harvard | Barry Goldsmith 2010, portfolio theory, Smart Define, viewed 24 September, 2026, <http://smartdefine.org/portfolio_theory/definitions/1160770>. |
| MLA | Barry Goldsmith. "portfolio theory" 21 October 2010. Web. 24 September 2026. <http://smartdefine.org/portfolio_theory/definitions/1160770> |