Two Applications of Modern Portfolio Theory to Portfolio Risk Analysis

  • Jason MacQueen

Abstract

Modern Portfolio Theory (MPT) grew out of the mathematical problem of how to construct an efficient portfolio from a chosen set of stocks, given their risks and expected returns, and subject to various practical constraints. Constructing such a portfolio is a purely mathematical process: it is done after the fund manager has made his judgments, and its purpose is to ensure that these judgments are reflected as accurately as possible in the portfolio. Such optimisation is one of the most widespread applications of MPT.

Keywords

Covariance Unat 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Jensen, M.C ‘The performance of Mutual Funds in the period 1945–1964’, Journal of Finance, Vol. XXIII, May 1968.Google Scholar
  2. Fisher, L. ‘Using MPT to maintain an efficiently diversified portfolio’, Financial Analysts Journal, May/June 1975.Google Scholar

Copyright information

© Desmond Corner and David G. Mayes 1983

Authors and Affiliations

  • Jason MacQueen

There are no affiliations available

Personalised recommendations