Modern Portfolio Theory and Its Problems

Marcus Schulmerich, Yves-Michel Leporcher and Ching-Hwa Eu
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Marcus Schulmerich: State Street Global Advisors (SSgA)
Yves-Michel Leporcher: Crédit Agricole
Ching-Hwa Eu: Deutsche Bank

Chapter 2 in Applied Asset and Risk Management, 2015, pp 101-173 from Springer

Abstract: Abstract This chapter presents the key principles of modern portfolio theory (MPT). After a brief review of regression analysis it introduces the capital asset pricing model (CAPM) and its extension, the Fama–French three-factor-model, together with the basic assumptions of the two models and empirical tests. The limitations of the CAPM are pointed out and critical views are presented concerning both models which are based on the fundamental concept of rational investors.

Keywords: Capital Asset Price Model; Market Portfolio; Monthly Return; Modern Portfolio Theory; Unsystematic Risk (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:mgmchp:978-3-642-55444-5_2

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DOI: 10.1007/978-3-642-55444-5_2

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