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Mean-Variance Optimization is a Nobel Prize-winning economic theory. Optimization looks at the expected
risk and return of each asset class along with the correlation among asset classes, and determines which
combination of asset classes will provide the highest expected return for any risk level. The goal of
optimization is to identify asset allocations that maximize returns for a given level of risk or minimize
risk for a given level of return. (Ibbotson, 2008)
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Portfolios below the curve are not efficient. For the same amount of risk you could achieve a greater return on investment.
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