This paper contrasts the perspectives provided by the traditional Modern Portfolio Theory (MPT) analysis, which uses arithmetic returns, and the Stochastic Portfolio Theory (SPT) analysis, which uses continuous returns. The MPT analysis implies that an efficient portfolio's reward is...

An idealized model of the investment process redefines the respective roles of security analysts and portfolio managers, quantifies such concepts as activity and aggressiveness, and explains how the individual analyst's efforts at forecasting returns translate into improved portfolio performance

Should an investor buy and hold a stock index? Hold the index plus a put on the index (portfolio insurance)? Or hold the index plus a short position in a call on the index (a covered write)? Which strategy will be the most efficient in terms of the tradeoff between risk and return? Which will...

Many studies have found that portfolios of low beta stocks have higher growth rates than portfolios of high beta stocks and have concluded that low beta stocks have higher growth rates than high beta stocks. Since rational investor behavior is thought to imply that additional risk is rewarded...

Because dividends are taxed at a higher rate than capital gains, as stock with a higher yields should have a higher expected return than a stock whose return is expected to result mostly from price appreciation. Adding yield to the traditional Security Market Line results in a "market plane"...

Many articles show how portfolio composition depends on the investment horizon. Typically, they conclude that portfolio composition changes in a simple way as the investment horizon lengthens.Gunthorpe and Levy [1994] is a superior example. It presents the case for a simple relationship clearly,...