Glossary · approach
Mean-Variance Analysis
The classical finance framework, due to Markowitz, that analyses investment decisions in the expected-return (mean) vs. risk (variance) plane.
Mean VarianceMarkowitz Framework
Mean-variance analysis, founded with Markowitz's 1952 paper, is the analytical framework of modern portfolio theory. It evaluates investment decisions in two dimensions: expected return (mean) and risk (variance or standard deviation). Geometrically, investment opportunities are points in mean-variance space, and the efficient frontier is the curve of maximum expected return per risk level. The investor picks a point on the frontier according to risk appetite. Its drawbacks (variance is symmetric — penalizes upside and downside equally, normal-distribution assumption, static decision) led to modern extensions (CVaR, mean-semivariance, dynamic programming). Markowitz shared the 1990 Nobel Prize in Economics with Sharpe and Miller for this framework.
Örnek
A pension fund offers four portfolio profiles: conservative (return 12%, risk 6%), balanced (15%, 10%), dynamic (18%, 14%), aggressive (22%, 20%). These are four points on the efficient frontier in mean-variance space.