Abstract
The aim of the Modern Portfolio Theory is to provide to a portfolio owner the tools necessary to implement an efficient and sustainable strategy focusing on minimizing the risk. According to this theory, risk is supposed to be reduced through the choice of a diversified portfolio. In fact, enlarging the scope of investments on a large range of market allows for the reducing of the risk by being less dependent of a single value. In addition, the application of the theory allows the trader to determine the value of an asset comparing the potential return with the risk. Several theories have been established to determine this value and the following paper will focus on the followings, Markowitz and the capital asset model, which are considered to be the most efficient. An efficient trading strategy doesn't mean to take major risk in order to get high return, it appears crucial to reduce the risk as much as possible in order to benefit from a sustainable growth of the portfolio's value. Regarding the Modern Portfolio Theory, the first key point to analyze appears to be the relationship between the risk and the potential return.
