Portfolio Theory - Revision history

Dirkjan at 19:25, 27 August 2020

2020-08-27T19:25:25Z

Dirkjan at 18:39, 27 August 2020

2020-08-27T18:39:21Z

Dirkjan: Created page with "The daily price change of an average stock is approximately normally distributed. Based on this given, http://en.wikipedia.org/wiki/Harry_Markowitz|H..."

2020-08-25T07:22:56Z

Created page with "The daily price change of an average stock is approximately normally distributed. Based on this given, http://en.wikipedia.org/wiki/Harry_Markowitz|H..."

New page

The daily price change of an average stock is approximately [[Normal distribution|normally distributed]]. Based on this given, [[http://en.wikipedia.org/wiki/Harry_Markowitz|Harry Markowitz]] developed '''''Portfolio Theory''''' (heavily criticized by Taleb in [[The Black Swan: The Impact of the Highly Improbable|The Black Swan: The Impact of the Highly Improbable]]). The basics of portfolio theory is that you can minimize the risk of an investment by spreading the investment over multiple securities. If you select multiple projects and plot risk and return in the same graph:

<html><img src = "/static/files/MBI/Module%2012/mckenna_fig1.jpg" width="500"/></html>

You want to move 'up' for better returns and 'left' for lower risk. The left/top most line denotes the portfolio mix which maximizes return for the lowest risk. Any portfolio along this line is called an '''''efficient portfolio'''''.
[[Category:finance]]

[[Category:M12]]

[[Category:Principles of Corporate Finance]]

[[Category:Term]]

← Older revision		Revision as of 18:39, 27 August 2020
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−	The daily price change of an average stock is approximately [[Normal distribution\|normally distributed]]. Based on this given, [[http://en.wikipedia.org/wiki/Harry_Markowitz\|Harry Markowitz]] developed '''''Portfolio Theory''''' (heavily criticized by Taleb in [[The Black Swan: The Impact of the Highly Improbable\|The Black Swan: The Impact of the Highly Improbable]]). The basics of portfolio theory is that you can minimize the risk of an investment by spreading the investment over multiple securities. If you select multiple projects and plot risk and return in the same graph:	+	Portfolio Theory
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−	~~<html><img src = "/static/files/MBI/Module%2012/mckenna_fig1.jpg" width="500"/></html>~~
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−	You want to move 'up' for better returns and 'left' for lower risk. The left/top most line denotes the portfolio mix which maximizes return for the lowest risk. Any portfolio along this line is called an '''''efficient portfolio'''''.
	[[Category:finance]]		[[Category:finance]]

← Older revision		Revision as of 19:25, 27 August 2020
Line 1:		Line 1:
−	Portfolio Theory	+	The daily price change of an average stock is approximately [[Normal distribution\|normally distributed]]. Based on this given, [[http://en.wikipedia.org/wiki/Harry_Markowitz\|Harry Markowitz]] developed '''''Portfolio Theory''''' (heavily criticized by Taleb in [[The Black Swan: The Impact of the Highly Improbable\|The Black Swan: The Impact of the Highly Improbable]]). The basics of portfolio theory is that you can minimize the risk of an investment by spreading the investment over multiple securities. If you select multiple projects and plot risk and return in the same graph:
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		+
		+
		+	<html><img src = "/static/files/MBI/Module%2012/mckenna_fig1.jpg" width="500"/></html>
		+
		+
		+
		+	You want to move 'up' for better returns and 'left' for lower risk. The left/top most line denotes the portfolio mix which maximizes return for the lowest risk. Any portfolio along this line is called an '''''efficient portfolio'''''.
	[[Category:finance]]		[[Category:finance]]