Observation that the construction of a diversified portfolio of risk-free investments and those with varying degree of risk is unaffected by the investor's personal preferences. That is, an investor makes choices on the basis of the net present value of the projected returns and not on his or her level of risk tolerance. Since this behavior separates the decision about the type of investments from the decision about the acceptable level of risk, it is named portfolio separation theorem. Its implication is that a company's choice of debt-equity ratio is inconsequential. Also called Fisher's Separation Theory after its proposer, the U.S. economist Irving Fisher (1876-1947).
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Definition of portfolio separation theorem: Observation that the construction of a diversified portfolio of risk-free investments and those with varying degree of risk ...
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Theory that an investor's choice of a risky investment portfolio is separate from his attitude towards risk. Related: Fisher's separation theorem.
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Similar financial terms. Efficient portfolio. A portfolio that provides the superior expected return for a given level of risk. Vega-neutral portfolio. A vega-neutral ...
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Portfolio Separation Theorem - This is the term used to describe the practice of separating the decision about the type of stock to invest in, from the decision ...
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Portfolio Separation Theorem Refer: Fisher's separation theorem. Theory stating that investors may have an attitude towards risk that is distinct and.
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previous 10 ... >>> http://www.special-loans.com/dictionary.asp?a=section&q= f&skip=530. Portfolio separation theorem. Definition: [crh] Theory that an investor's ...
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