2007-02-19 21:47:41 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
Modern portfolio theory begins with the work of Markowitz when he found that adequate compensation was not being given to risk in an investment. So he came up with the famous Capital Asset Pricing Model. From then on it was figured out from that the a portfolio consisting of different risk entities can tailor make to individual risk preference and reward. This was achieved from Capital Asset Pricing Model. Nowadays people can individually tailro make portfolios based on individual risk preferences and can allocate funds in different categories of stocks, bonds, cash etc; depending on the risk and return on each of them.
2007-02-19 22:15:21 · answer #1 · answered by Mathew C 5 · 0⤊ 0⤋
Modern Portfolio theory has allowed risk to be measured on the portfolio level as opposed to the individual investment. The adoption of modern portfolio theory is what motivated the adaptation of the "New" prudent man theory and the elimination of the lists of investments that are forbidden in fiduciary accounts.
2007-02-20 01:33:31 · answer #2 · answered by Anonymous · 0⤊ 0⤋