The modern portfolio theory as an investment decision tool

By Iyiola Omisore, M. Yusuf, Nwufo Christopher. 2012

110 citations recorded by the source corpus.

This research paper is academic exposition into the modern portfolio theory (MPT) written with a primary objective of showing how it aids an investor to classify, estimate, and control both the kind and the amount of expected risk and return in an attempt to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return. A methodology section is included which examined applicability of the theory to real time investment decisions relative to assumptions of the MPT. A fair critique of the MPT is carried out to determine inherent flaws of the theory while attempting to proffer areas of further improvement (for example, the post-modern portfolio theory [PMPT]). The paper is summarised to give a compressed view of the discourse upon which conclusions were drawn while referencing cited literature as employed in the course of the presentation.   Key words: Assets, beta coefficient, diversification, expected returns, investment, portfolio, risk, uncertainty

Subfields: Discrete Mathematics and Combinatorics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/ac6cc4eaba2027bb0840333a43d1e60f5f3da130