Modern Portfolio Theory
Modern portfolio theory (MPT) is a theory of investment which attempts to explain how investors can maximize return and minimize risk. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel prize for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral economics, and many companies using variants of MPT have gone bankrupt in various financial crises.it quantifies the relationship between risk and return and assumes that an investor must be compensated for assuming risk. The portfolio theory is modern, inasmuch as it differs from traditional security analysis, in not attaching importance to analysis of individual investments; it tries to determine the statistical relationships between individual investments which comprise a portfolio.
The four basic steps are:
(a) security valuation, identifying assets in terms of their expected risk and expected return;
(b)set allocation decision, i.e., deciding how assets are to be allocated to various classes of investment, e.g., shares, bonds, gold, etc.;
(c) portfolio optimization, i.e., achieving the best returns for a particular level of risk by choosing selected investment avenues; and (
d) performance measurement – analysing each asset’s performance in relation to market – related and industry or individual share – related risk. With the help of this theory an investor is able to analyse, classify, and control both the kind and amount of expected risk and return from a given portfolio.
Moving Average
it is an average of share prices for specified periods – one week, a fortnight, a month, or a year or years – and showing trends of price movements, rather than daily fluctuations.
MRTPC or Monopolies and Restrictive Trade Practices
Commissions Set under the MRTP Act 1969 to ensure the diffusion of and prevent the concentration of the ownership and control of the material resources of the country in few hands, MRTPC keeps a check on the expansion of large firms, setting up of new undertakings, mergers, and amalgamations of companies, orders separation of interconnected companies, and restricts the acquisition and transfer of shares of or by certain companies. It can enquire into monopolistic or restrictive or unfair trade practices, of its own accord or on complaint by the public. The MRTP Act covers only private
Murphy’s Law
Murphy’s law is an adage that broadly states: “Anything that can go wrong will go wrong.”