Modern portfolio theory

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Efficient Frontier. The hyperbola is sometimes referred to as the 'Markowitz Bullet', and is the efficient frontier if no risk-free asset is available. With a risk-free asset, the straight line is the efficient frontier.

Modern portfolio theory (MPT) is a theory of finance which attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel memorial prize for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral economics.

• See also: Wikipedia

• Related: Bias ratio (finance), Black-Litterman model, Fundamental analysis, Investment theory, Jensen's alpha, Mutual fund separation theorem, Roll's critique, Sortino ratio, Treynor ratio, Two-moment decision models, Value investing

Free Stock Portfolio Optimization Online Free Stock Portfolio Optimization Online www.fastocks.com - Web

Macro-Investment Analysis Macro-Investment Analysis www.stanford.edu/~wfsharpe/mia/mia.htm - Web

An Introduction to Investment Theory An Introduction to Investment Theory viking.som.yale.edu/will/finman540/classnotes/notes.html - Web

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