According to Markowitz's mean-variance model, the variance of a portfolio is equal to the weighted:
A) average of the individual variances.
B) covariances between all unique pairs of securities.
C) variances plus the weighted covariances of all pairs of securities.
D) covariances plus the weighted betas of the securities.

Question

Quizplus · Accepted Answer

Markowitz's mean-variance model posits that the variance of a portfolio is determined by both the weighted variances of the individual securities and the weighted covariances between all pairs of securities in the portfolio. This approach takes into account not only the risk associated with individual investments but also how they interact with each other within the portfolio.

According to Markowitz's Mean-Variance Model, the Variance of a Portfolio