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# Portfolio Theory's Underpinning Principles Need to Be Uncovered before Appreciating the Ceration of Capital Asset Pricing Model

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Finance & Accounting

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Portfolio Theory's underpinning principles need to be uncovered before appreciating the creation of capital asset pricing model (CAPM), Evaluate the reason why investors should establish portfolios. Contents Contents 2 Introduction 3 Principles of portfolio 3 Theoretical background of portfolio management theory 4 Net present value method 5 Evaluation of risk with large portfolio 6 Systematic risk 7 Market return on systematic risk 8 Measurement of systematic risk 8 Conclusion 9 Reference 9 Introduction Portfolio can be described as the group of assets or pool of securities in which money is invested…

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## Introduction

The gain achieved from one asset can offset the loss incurred from the other only if both the assets are negatively correlated. In this project the basic principles of the portfolio theory or the portfolio management theory has been discussed along with the theoretical aspect of the portfolio management theory. The investment viability criteria have also been discussed along with the other basic conditions like risk and return which should be considered before making any investment. The need of diversification of the portfolio has also been discussed along with all the risks associated with the diversified portfolios. Principles of portfolio As per Lonestreth Bevis portfolio can be described as a mixture of investment which is held or will be held by the investor. This means a portfolio is a collection or a group of two or more assets or securities held by the investor to gain maximum return while setting off the risk associated with one stock with the return of the other. ...

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