Advances in Theories and Empirical Studies on Portfolio Management

Megha Agarwal
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Megha Agarwal: University of Delhi

Chapter 2 in Developments in Mean-Variance Efficient Portfolio Selection, 2015, pp 20-55 from Palgrave Macmillan

Abstract: Abstract Portfolio selection modelling dates back to the development of mean-variance1 model of Markowitz. The concept of diversification and an efficient frontier provided the logical basis for selecting a portfolio based on individual utility curves. Roy (1952) provided a specific point on the efficient frontier whereby he attempted to minimise the upper bound of the chance of a dread event. Roy’s principle of safety first, further supported the concept of diversification of resources among a wide variety of assets. Utility was defined in terms of minimisation of a chance of a catastrophe. Markowitz used statistical analysis and Roy used econometric analysis for the purpose of their studies. Tobin (1958) provided the basis for two fund separation theorem in the context of portfolio selection whereby an investor allocates his resources among risky and riskless assets. The theory propounded by Tobin was based on the risk avoiding behaviour of investors and was conceptually shown to be superior to the Keynesian theory of liquidity preference.

Keywords: Stock Return; Mutual Fund; Portfolio Selection; Future Market; Efficient Frontier (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-35992-6_2

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DOI: 10.1057/9781137359926_2

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