Diversification (finance) and Modern portfolio theory

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Difference between Diversification (finance) and Modern portfolio theory

Diversification (finance) vs. Modern portfolio theory

In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk.

Beta (finance)

In finance, the beta (β or beta coefficient) of an investment indicates whether the investment is more or less volatile than the market as a whole.

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Capital asset pricing model

In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.

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Coherent risk measure

In the fields of actuarial science and financial economics there are a number of ways that risk can be defined; to clarify the concept theoreticians have described a number of properties that a risk measure might or might not have.

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Expected return

The expected return (or expected gain) on a financial investment is the expected value of its return (of the profit on the investment).

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Expected value

In probability theory, the expected value of a random variable, intuitively, is the long-run average value of repetitions of the experiment it represents.

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Harry Markowitz

Harry Max Markowitz (born August 24, 1927) is an American economist, and a recipient of the 1989 John von Neumann Theory Prize and the 1990 Nobel Memorial Prize in Economic Sciences.

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Journal of Financial and Quantitative Analysis

The Journal of Financial and Quantitative Analysis is a peer-reviewed bimonthly academic journal published by the Michael G. Foster School of Business at the University of Washington in cooperation with the W. P. Carey School of Business at Arizona State University and the University of North Carolina's Kenan-Flagler Business School.

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Stanford University

Stanford University (officially Leland Stanford Junior University, colloquially the Farm) is a private research university in Stanford, California.

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Systematic risk

In finance and economics, systematic risk (in economics often called aggregate risk or undiversifiable risk) is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy-wide resource holdings, or aggregate income.

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Variance

In probability theory and statistics, variance is the expectation of the squared deviation of a random variable from its mean.

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William F. Sharpe

William Forsyth Sharpe (born June 16, 1934) is an American economist.

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