Modern Portfolio Theory (MPT)

Modern Portfolio Theory (MPT)

Postby winston » Tue Oct 06, 2020 12:54 pm

What Is Modern Portfolio Theory (MPT) and Why Is It Important?

Modern Portfolio Theory, or MPT, is about maximizing the return investors could get in their investment portfolio considering the risk involved in the investments.


Markowitz theorized that investors could design a portfolio to maximize returns by accepting a quantifiable amount of risk.

In other words, investors could reduce risk by diversifying their assets and asset allocation of their investments using a quantitative method.

Beta is an attempt to quantify a portfolio's susceptibility to systematic risk within a market.

A beta of 1 means the systematic risk exposure of a portfolio is the same as exists in the market. Higher betas indicate more risk, and lower indicate less.

Source: ... yptr=yahoo
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