# 5 Assumptions of the Markowitz Portfolio Theory

- Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period.
- Investors maximize one-period expected utility and their utility curves demonstrate diminishing marginal utility of wealth.
- Investors estimate risk on basis of variability of expected returns.
- Investors base decisions solely on expected return and risk.
- Investors prefer higher returns to lower risk and lower risk for the same level of return.

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Investors prefer higher returns to lower risk and lower risk for the same level of return.

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