Modern Portfolio Theory: Essential Concepts and Messages

  • Reference: FN-640-E

  • Number of pages: 15

  • Publication Date: Mar 22, 2018

  • Source: IESE (España)

  • Type of Document: Technical Note

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This note briefly summarizes the basic intuition and most important implications of Modern Portfolio Theory. It focuses on the equilibrium at the heart of the theory and discusses how this equilibrium is obtained, why it is important, and its essential implications. It also discusses the impact this equilibrium has had on financial practice. The discussion stresses the intuition behind the theory; a sketch of the formal background is relegated to the appendix, which can be omitted by readers only interested in the practical aspects of the analytical framework.

Learning Objective

Aimed at programs focusing on Finance and second-year MBA classes.


portfolio risk volatility