Modern Portfolio Theory and Investment Analysis


With the hopes of perfect investment with attributes of high returns and low risks, Modern Portfolio Theory and Investment Analysis examines the characteristics and analysis of individual securities, as well as the theory and practice of optimally combining securities into portfolios. Stressing the economic intuition behind the subject matter while presenting advanced concepts of investment analysis and portfolio management, the authors present material that captures the state of modern portfolio analysis, general equilibrium theory, and investment analysis in an accessible and intuitive manner. Modern Portfolio Theory and Investment Analysis will help you discover the strengths and weaknesses of modern portfolio theory as well as the latest breakthroughs.

  • This book can be used for courses in both portfolio theory and investment analysis that have an emphasis on portfolio theory.

  • It can also be used in a course in investments where both portfolio analysis and security analysis are discussed.

  • A chapter on behavioral finance is also included, aimed to explore the nature of individual decision making.

  • In addition, investors will find material on value at risk and the use of simulation to enhance their understanding of the field.

  • Topics also include financial securities and financial markets; sections on the uses of Arbitrage Pricing Theory, the performance of international funds, bond management and multi-index models in portfolio evaluation.

New to this Edition

  • A new chapter has been added to describe the changing conditions in the mutual fund industry.

  • Structural changes that have occurred in the markets in which securities that are traded have been recognized.

  • Discussion on the causes of the financial crisis of 2008 and the financial instruments that affected the crisis.

Table of Contents

  • Chapter 1: Introduction

  • Chapter 2: Financial Securities

  • Chapter 3: Financial Markets

  • Chapter 4: The Characteristics of the Opportunity Set Under Risk

  • Chapter 5: Delineating Efficient Portfolios

  • Chapter 6: Techniques for Calculating the Efficient Frontier

  • Chapter 7: The Correlation Structure of Security Returns: The Single-Index Model

  • Chapter 8: The Correlation Structure of Security Returns: Multi-Index Models and Grouping Techniques

  • Chapter 9: Simple Techniques for Determining the Efficient Frontier

  • Chapter 10: Estimating Expected Returns

  • Chapter 11: How to Select Among the Portfolios in the Opportunity Set

  • Chapter 12: International Diversification

  • Chapter 13: The Standard Capital Asset Pricing Model

  • Chapter 14: Nonstandard Forms of Capital Asset Pricing Models

  • Chapter 15: Empirical Tests of Equilibrium Models

  • Chapter 16: The Arbitrage Pricing Model APT – A Multifactor Approach to Explaining Asset Prices

  • Chapter 17: Efficient Markets

  • Chapter 18: The Valuation Process

  • Chapter 19: Earnings Estimation

  • Chapter 20: Behavioral Finance, Investor Decision Making, and Asset Prices

  • Chapter 21: Interest Rate Theory and the Pricing of Bonds

  • Chapter 22: The Management of Bond Portfolios

  • Chapter 23: Option Pricing Theory

  • Chapter 24: The Valuation and Uses of Financial Futures

  • Chapter 25: Mutual Funds

  • Chapter 26: Evaluation of Portfolio Performance

  • Chapter 27: Evaluation of Security Analysis

  • Chapter 28: Portfolio Management Revisited