Abstract
Harry Markowitz is a Nobel Prize winning economist who worked on the modern portfolio theory. His work has changed the ways of investing for many traders, keeping in mind that his work gave scientific features to risk versus return. The modern portfolio theory is made of different tools to optimise investors portfolios and in which way risk has to be managed with return. The tools are numerous and we count the diversification, the efficient frontier, the capital asset pricing model or CAPM, the beta co-efficient among them etc. Regarding diversification, the capital asset pricing model, and the beta coefficient, are explained in their respective parts of the assignment. The efficient frontier was defined by Markowitz in 1952, and it gives a representation of how to get the optimum portfolio regarding the two variables, risk and return.
