Jump to ContentJump to Main Navigation
Portfolio Theory and Management$
Users without a subscription are not able to see the full content.

H. Kent Baker and Greg Filbeck

Print publication date: 2013

Print ISBN-13: 9780199829699

Published to Oxford Scholarship Online: May 2013

DOI: 10.1093/acprof:oso/9780199829699.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 15 December 2019

Modern Portfolio Theory

Modern Portfolio Theory

(p.23) 2 Modern Portfolio Theory
Portfolio Theory and Management

Eric Jacquier

Oxford University Press

This chapter surveys modern portfolio theory, which is one of the most spectacular developments of finance in the last 50 years. It starts with the basic one-period setup under the assumption of normality with the successive contributions including the basic Markowitz mean-variance framework, the efficient frontier, and the Sharpe-Lintner capital asset pricing model. Utility and risk aversion are also discussed. The chapter then discusses the multiperiod extension and Merton's optimal asset allocation. The second part of the chapter shows how to extend the framework to allow for parameter uncertainty. In that process, the chapter also briefly reviews needed concepts such as the predictive density, shrinkage, and how the Bayesian framework allows the incorporation of prior views to improve on the precision of estimates necessary in the portfolio construction process.

Keywords:   modern portfolio theory, mean-variance, asset allocation, utility, risk aversion, parameter uncertainty, Bayesian framework, predictive density, shrinkage

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .