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Introduction to Excess Returns Understanding excess returns is crucial for investors seeking to gauge their investment performance relative to a benchmark or risk-free rate. Excess returns can be calculated by comparing an investment’s return to the return of a proxy, typically a riskless rate or a benchmark with similar levels
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Introduction to the Efficient Frontier The efficient frontier is a concept introduced by Nobel Laureate Harry Markowitz in 1952, serving as a cornerstone of modern portfolio theory (MPT). This vital financial tool represents the set of optimal investment portfolios that offer the highest expected return for a specific level of
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Introduction to the Capital Market Line The capital market line (CML) is a crucial concept within modern portfolio theory, representing portfolios that optimally combine risk and return. It outlines the relationship between the risk-free rate of return and the expected returns of a hypothetical well-diversified portfolio consisting of all investable
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