Modern Portfolio Theory

Modern portfolio theory (MPT), which was introduced by Harry Markowitz's seminal paper Portfolio Selection over sixty years ago, has stood the test of time. Both his original theory and extensions made to the model by Professors James Tobin and Bill Sharpe have won Nobel Prizes. Today, MPT has grown to impact portfolio managers, financial service organizations, individual investors, and the finance and economics classrooms of universities around the world. Building on three previous editions of the book Portfolio Analysis, of which coauthor Jack Clark Francis was an integral part, Modern Portfolio Theory skillfully provides a concise review of portfolio theory and offers new insights. It can help busy finance professionals stay current on the theoretical developments in their field and allow students to gain a solid foundation in what MPT encompasses. Divided into six comprehensive parts, this reliable resource addresses various aspects of portfolio analysis by tracing the contributions made by different people in the decades since MPT was created. Along the way, it also explores new developments that may make MPT more valuable than ever. Topics that are discussed in detail include: Probability foundations Utility analysis Mean-variance portfolio analysis Non-mean-variance portfolio analysis Asset pricing models Implementation of portfolio theory Portfolio performance evaluations And while this book uses mathematical and statistical explanations in its coverage of models and other subjects, the material is presented in way that is understandable to a wide range of readers-from finance veterans to those just entering the field-and supplemented with graphs. The coauthors have also created several Excel spreadsheets that compute Markowitz efficient frontiers under various assumptions and circumstances. This user-friendly software is available online and can be easily downloaded. In addition, resources for professors can be found on Wiley's Global Education website. Engaging and accessible, Modern Portfolio Theory contains essential insights on this discipline and offers a comprehensive look at its foundations, evolution, and implementation in today's dynamic world of finance.