Mean-variance optimization is a mathematical framework for constructing an investment portfolio that aims to maximize expected returns for a given level of risk or minimize risk for a desired level of expected return. This approach considers the trade-off between risk and return, allowing investors to make informed decisions about asset allocation. The process uses historical data on asset returns, variances, and covariances to identify the most efficient frontier of portfolios that meet these criteria.
congrats on reading the definition of mean-variance optimization. now let's actually learn it.