Modern Portfolio Theory (MPT)¶
Modern portfolio theory (MPT) is a theory on how risk-averse investors can construct portfolios to maximize expected return based on a given level of market risk. Harry Markowitz pioneered this theory in his paper "Portfolio Selection," which was published in the Journal of Finance in 1952.1 He was later awarded a Nobel Prize for his work on modern portfolio theory.
In this example, we have a customer report on how well they and balance their Unicorn Porfolio 🦄 to minimize their risks and see how possible portfolio choices compare to the individual stock positions. By doing this we can achieve a better return with lower risk that any individual stock.
This is done using the Efficient Frontier methodology.
This work is based on the notes of Ricky Kim which I continue to extend.