Rich begger

This theory seeks to provide various information on how to make a rational investor optimize his/her portfolio and also describes how a risky asset should be priced. This modern theory states the basic concepts as diversification, capital asset pricing model, efficient frontier, alpha and beta coefficients, Capital and Securities Line. This modern port-folio theory models an Asset’s return as random variable and portfolio as the weighted combination of assets so that the return of portfolio is the weighted combination of asset’s returns. This theory is very helpful to strategic investor and makes his portfolios right depending on the risks chosen.