Modern Portfolio Theory: Foundations, Analysis, and New Developments
- 10h 42m
- Dongcheol Kim, Jack Clark Francis
- John Wiley & Sons (US)
- 2013
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
If you want to gain a complete understanding of modern portfolio theory this is the book you need to read.
About the Authors
JACK CLARK FRANCIS is Professor of Economics and Finance at Bernard M. Baruch College in New York City. His research focuses on investments, banking, and monetary economics, and he has had dozens of articles published in many refereed academic, business, and government journals. Dr. Francis was an assistant professor of finance at the University of Pennsylvania's Wharton School of Finance for five years and was a Federal Reserve economist for two years. He received his bachelor's and MBA from Indiana University and earned his PhD in finance from the University of Washington in Seattle.
Dongcheol Kim is a Professor of Finance at Korea University in Seoul. He served as president of the Korea Securities Association and editor-in-chief of the Asia-Pacific Journal of Financial Studies. Previously, he was a finance professor at Rutgers University. Kim has published articles in Financial Management, the Accounting Review, Journal of Financial and Quantitative Analysis, Journal of Economic Research, Journal of Finance, and Journal of the Futures Market.
In this Book
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Introduction
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Assessing Risk
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Risk and Diversification
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Single-Period Utility Analysis
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Graphical Portfolio Analysis
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Efficient Portfolios
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Advanced Mathematical Portfolio Analysis
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Index Models and Return-Generating Process
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Non-Normal Distributions of Returns
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Non-Mean-Variance Investment Decisions
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Risk Management—Value at Risk
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The Capital Asset Pricing Model
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Extensions of the Standard CAPM
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Empirical Tests of the CAPM
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Continuous-Time Asset Pricing Models
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Arbitrage Pricing Theory
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Portfolio Construction and Selection
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Portfolio Performance Evaluation
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Performance Attribution
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Stock Market Developments
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Bibliography
