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    What is Mean Variance Portfolio Theory a.k.a. Modern Portfolio Theory

    MVPT is a mathematical framework for assembling a portfolio of assets that maximises return for a given level of risk.[1]

    Its key tenets are[2]

    • owning different kinds of financial assets is less risky than owning only one type
    • an asset's risk and return should be assessed by how it contributes to a portfolio's overall risk and return
    • variance is a proxy for risk

    Assumptions of MVPT

    • stocks face systematic (non diversifiable) risk e.g. market risks: interest rates, inflation
    • stocks face non systemic (diversifiable) risk e.g. poor management

    Does it assume normal distribution of returns ?

    Presumably Warren B et al focus on turning non systemic risk into something they understand and hence isn't a risk but a sure thing ??  so perhaps a takeaway is.. if investing and using ben graham techniques... take on the non systemic risk.. otherwise diversify

    Optimal Portfolio Determined by MVPT


    Benefits of MVPT


    Key Mathematical Results

    Expected return or the portfolio


    Criticisms of Modern Portfolio Theory



    • How does MPT tie in with CAPM as talk of systemic (undiversifiable) risk and non-diversifiable risk sounds like same thing?