Portfolio Theory

Journal of Mathematical Finance, Forthcoming

Posted: 8 Jun 2016 Last revised: 31 Jul 2016

See all articles by Fred Viole

Fred Viole

OVVO Financial Systems; Fordham University

Date Written: June 7, 2016

Abstract

In 1952 Harry Markowitz put forth a solution to the portfolio selection process. He summarizes the stages and objectives with the following, “The process of selecting a portfolio may be divided into two stages. The first stage starts with observation and experience and ends with beliefs about the future performances of available securities. The second stage starts with the relevant beliefs about future performances and ends with the choice of portfolio.” We offer a complimentary extension of modern portfolio theory, namely the redefinition of the second stage via partial moments and the probabilistic reformulation of security analysis of the first stage via the conditioning of returns with entropy proxies.

Keywords: Portfolio Theory, Partial Moments, Behavioral Finance, Utility Theory

JEL Classification: C00, G00, G11

Suggested Citation

Viole, Fred, Portfolio Theory (June 7, 2016). Journal of Mathematical Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2791621 or http://dx.doi.org/10.2139/ssrn.2791621

Fred Viole (Contact Author)

OVVO Financial Systems ( email )

NJ
United States

Fordham University ( email )

Bronx, NY 10458
United States

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