Develop an understanding of how financial investment decisions are made through the application of modern portfolio theory. You will learn how diversification impacts on investor’s risk and return, and how to calculate measures of risk and return on a portfolio of financial investments. You will have the opportunity to analyse process and theories such as Markowitz diversification and the emergence of an ‘efficient frontier’.

Module Description

This module aims to develop student’s understanding of financial investment decision through an understanding of the principles of modern portfolio theory and the application of diversification to international portfolios of investments to maximise the risk-return trade-off.

Module Content

Historic returns on ‘market portfolios’
Calculating return on a portfolio of financial investments
Calculating risk on a portfolio of financial investments
Markowitz diversification
The ‘efficient frontier’
The ‘market portfolio’
Applying the theory in practice
Stock market anomalies
The overreaction effect of the stock market
Chaos theory?

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