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Institute of Investing

Portfolio Theory

The mathematical frameworks governing how rational investors should build portfolios to maximize expected return for a given level of risk. Moving beyond asset picking to structural allocation.

Capital Asset Pricing Model (CAPM)

Describes the relationship between systematic risk and expected return for assets. The theoretical foundation for calculating the cost of equity.

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Modern Portfolio Theory (MPT)

Harry Markowitz's framework demonstrating how diversification reduces portfolio volatility without sacrificing expected return. The Efficient Frontier.

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