Modern Portfolio Theory : Foundation, Analysis, and New Developments

A through guide covering Modern Portfolio Theory as well as the recent developments surrounding it Modern portfolio theory (MPT), which originated with Harry Markowitz's seminal paper "Portfolio Selection" in 1952, has stood the test of time and continues to be the intellectual foundation for real-world portfolio management. This book presents a comprehensive picture of MPT in a manner that can be effectively used by financial practitioners and understood by students. Modern Portfolio Theory provides a summary of the important findings from all of the financial research done since MPT was created and presents all the MPT formulas and models using one consistent set of mathematical symbols. Opening with an informative introduction to the concepts of probability and utility theory, it quickly moves on to discuss Markowitz's seminal work on the topic with a thorough explanation of the underlying mathematics. Analyzes portfolios of all sizes and types, shows how the advanced findings and formulas are derived, and offers a concise and comprehensive review of MPT literature Addresses logical extensions to Markowitz's work, including the Capital Asset Pricing Model, Arbitrage Pricing Theory, portfolio ranking models, and performance attribution Considers stock market developments like decimalization, high frequency trading, and algorithmic trading, and reveals how they align with MPT Companion Website contains Excel spreadsheets that allow you to compute and graph Markowitz efficient frontiers with riskless and risky assets If you want to gain a complete understanding of modern portfolio theory this is the book you need to read.

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Year of publication:	2013 ; 1st ed.
Authors:	Francis, Jack Clark
Other Persons:	Kim, Dongheol (contributor) ; Kim, Dongcheol (contributor)
Publisher:	New York : John Wiley & Sons, Incorporated
Subject:	Portfolio-Management \| Portfolio selection \| Theorie \| Theory

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Extent:	1 online resource (578 pages)
Series:	Wiley Finance Ser. ; v.795
Type of publication:	Book / Working Paper
Language:	English
Notes:	Description based on publisher supplied metadata and other sources. Cover; Title Page; Copyright; Contents; Preface; Chapter 1 Introduction; 1.1 The Portfolio Management Process; 1.2 The Security Analyst's Job; 1.3 Portfolio Analysis; 1.3.1 Basic Assumptions; 1.3.2 Reconsidering the Assumptions; 1.4 Portfolio Selection; 1.5 The Mathematics is Segregated; 1.6 Topics to be Discussed; Appendix: Various Rates of Return; A1.1 Calculating the Holding Period Return; A1.2 After-Tax Returns; A1.3 Discrete and Continuously Compounded Returns; Part 1 Probability Foundations; Chapter 2 Assessing Risk; 2.1 Mathematical Expectation; 2.2 What Is Risk?; 2.3 Expected Return 2.4 Risk of a Security2.5 Covariance of Returns; 2.6 Correlation of Returns; 2.7 Using Historical Returns; 2.8 Data Input Requirements; 2.9 Portfolio Weights; 2.10 A Portfolio's Expected Return; 2.11 Portfolio Risk; 2.12 Summary of Notations and Formulas; Chapter 3 Risk and Diversification; 3.1 Reconsidering Risk; 3.1.1 Symmetric Probability Distributions; 3.1.2 Fundamental Security Analysis; 3.2 Utility Theory; 3.2.1 Numerical Example; 3.2.2 Indifference Curves; 3.3 Risk-Return Space; 3.4 Diversification; 3.4.1 Diversification Illustrated; 3.4.2 Risky A + Risky B = Riskless Portfolio 3.4.3 Graphical Analysis3.5 Conclusions; Part 2 Utility Foundations; Chapter 4 Single-Period Utility Analysis; 4.1 Basic Utility Axioms; 4.2 The Utility of Wealth Function; 4.3 Utility of Wealth and Returns; 4.4 Expected Utility of Returns; 4.5 Risk Attitudes; 4.5.1 Risk Aversion; 4.5.2 Risk-Loving Behavior; 4.5.3 Risk-Neutral Behavior; 4.6 Absolute Risk Aversion; 4.7 Relative Risk Aversion; 4.8 Measuring Risk Aversion; 4.8.1 Assumptions; 4.8.2 Power, Logarithmic, and Quadratic Utility; 4.8.3 Isoelastic Utility Functions; 4.8.4 Myopic, but Optimal; 4.9 Portfolio Analysis 4.9.1 Quadratic Utility Functions4.9.2 Using Quadratic Approximations to Delineate Max[E(Utility)] Portfolios; 4.9.3 Normally Distributed Returns; 4.10 Indifference Curves; 4.10.1 Selecting Investments; 4.10.2 Risk-Aversion Measures; 4.11 Summary and Conclusions; Appendix: Risk Aversion and Indifference Curves; A4.1 Absolute Risk Aversion (ARA); A4.2 Relative Risk Aversion (RRA); A4.3 Expected Utility of Wealth; A4.4 Slopes of Indifference Curves; A4.5 Indifference Curves for Quadratic Utility; Part 3 Mean-Variance Portfolio Analysis; Chapter 5 Graphical Portfolio Analysis 5.1 Delineating Efficient Portfolios5.2 Portfolio Analysis Inputs; 5.3 Two-Asset Isomean Lines; 5.4 Two-Asset Isovariance Ellipses; 5.5 Three-Asset Portfolio Analysis; 5.5.1 Solving for One Variable Implicitly; 5.5.2 Isomean Lines; 5.5.3 Isovariance Ellipses; 5.5.4 The Critical Line; 5.5.5 Inefficient Portfolios; 5.6 Legitimate Portfolios; 5.7 ``Unusual'' Graphical Solutions Don't Exist; 5.8 Representing Constraints Graphically; 5.9 The Interior Decorator Fallacy; 5.10 Summary; Appendix: Quadratic Equations; A5.1 Quadratic Equations; A5.2 Analysis of Quadratics in Two Unknowns A5.3 Analysis of Quadratics in One Unknown
ISBN:	978-1-118-41720-1 ; 978-1-118-37052-0
Source:	ECONIS - Online Catalogue of the ZBW

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