Overall investment strategy that seeks to construct an optimal portfolio by considering the relationship between risk and return, especially as measured by alpha, beta, and R-squared. This theory recommends that the risk of a particular stock should not be looked at on a standalone basis, but rather in relation to how that particular stock's price varies in relation to the variation in price of the market portfolio. The theory goes on to state that given an investor's preferred level of risk, a particular portfolio can be constructed that maximizes expected return for that level of risk. also called modern investment theory.
Related information about modern portfolio theory:
- Modern portfolio theory - Wikipedia, the free encyclopedia
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 ...
- Modern Portfolio Theory (MPT) Definition | Investopedia
A theory on how risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that ...
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Jan 7, 2010 ... See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
- Modern Portfolio Theory
Article and interactive features explain risk and diversification, and let you use the Sharpe Ratio to build an efficient portfolio.
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- In defense of "modern portfolio theory" - CBS News
Oct 10, 2012 ... Some pundits still argue that the 2008 financial crisis debunked this important investment precept -- they're wrong.
- Is Modern Portfolio Theory Dead? Come On. | TechCrunch
Aug 11, 2012 ... Editor's note: Paul Pfleiderer is the C.O.G. Miller Distinguished Professor of Finance at the Stanford Graduate School of Business and ...
- Is modern portfolio theory bunk? - InvestmentNews
Apr 19, 2012 ... Surprising new research indicates that greater risk does not, in fact, lead to greater reward. This little nugget would seem to debunk a basic ...