Modern Portfolio Theory
Chapter from the book:
Akkaynak,
B.
(ed.)
2025.
Finance Theory and Practices.
Synopsis
This chapter theoretically examines the mathematical framework of Modern Portfolio Theory, founded by Harry Markowitz, and its revolutionary role in investment decision-making. The study also includes an example application explaining the impact of portfolio diversification on risk distribution. Modern Portfolio Theory has led to a paradigm shift in financial economics by advocating that investors manage risk and return using statistical and quantitative methods rather than intuitively. The primary objective of this study is to explain the genesis of the Mean-Variance model within the framework of Modern Portfolio Theory, its fundamental assumptions, the fundamental concepts of return, risk, and diversification in portfolio optimization, and the criticisms of this theory.
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Copyright (c) 2025 Bilal Akkaynak; Kübra Saka Ilgın- Ahmet Zelka- İsmail Fatih Ceyhan- Berk Yıldız- Ferhat Demirci- Aziz Kaldırım- Bilal Akkaynak- Gülhan Deniz- Muhsin Uslu- Murat Yıldırım- Hacer Şeyma Dilaver- Salim Sercan Sarı- Hilal Ok Ergün- Hümeyra Yıldız- Muhammed Yılmaz- İbrahim Yaşar Gök- İnci Merve Altan- Adem Ruhan Sönmez- Mehmet Ozan Akman- Hasan Aydın Okuyan- Devran Deniz- Elif Sinem Köse- Muhammed Hanifi Van- Yasin Cihan