MPT Principles Valid After 5 Decades

Sumnicht, Vern
June 2009
Journal of Financial Planning;Jun2009 Trends in Investing, p16
Academic Journal
The article discusses the modern portfolio theory (MPT) proposed by Harry Markowitz. Markowitz used the principles of MPT to develop an algorithm determining optimal portfolio allocation, known as the mean variance optimization (MVO) model. It has been found that the MVO model is flawed, and because of its association with the model, MPT is considered erroneous by many. To nullify the perception and prove its validity, the principles of MPT are presented, including risk aversion, market efficiency, and frontier efficiency.


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