modern portfolio theory


Overall investment strategy that seeks to construct an optimal portfolio by considering the relationship between risk and return, especially as measured by alpha, beta, and R-squared. This theory recommends that the risk of a particular stock should not be looked at on a standalone basis, but rather in relation to how that particular stock's price varies in relation to the variation in price of the market portfolio. The theory goes on to state that given an investor's preferred level of risk, a particular portfolio can be constructed that maximizes expected return for that level of risk.
also called modern investment theory.

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You should try and learn about the modern portfolio theory and decide if that is a good way for you to proceed.

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We dabbled in some modern portfolio theory and came up with a strategy that on paper looked to offer some blockbuster returns.

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When he looked at the complex calculations involved in determining the strategy he wanted to use via the modern portfolio theory, he knew that he was not adept enough to precisely figure the risk he was taking compared to the anticipated gain.

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