ABSTRACT
This chapter describes a unit on portfolio analysis. It derives a criterion that combines portfolio mean and variance. To review, recall that bi-criterion portfolio analysis, or mean-variance analysis, is based on the mean and variance of portfolio rate of return (ROR). The scale factor 12(inA/2) emerges from the analysis to be used in this chapter, based on an exponential utility function for portfolio ROR, so we retain this factor. To review in general, combination portfolios are considered, meaning the combination of a risk-free portion and a risky portion. A single criterion incorporates both mean and variability. This criterion arises from an exponential utility function for wealth.
