A portfolio is efficient if one is unable to find a competing portfolio with a higher expected return and the same or lower rate of volatility.
The need for classifying portfolios between efficient and inefficient
Classification of portfolios are critical to investors. They help investors to make decisions regarding which portfolio to invest in.
Investors usually stay away from inefficient portfolios as a pose a higher risk relatively.
A portfolio is inefficient if there is another portfolio that has a higher return without a higher risk of volatility.
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