Abstract
The Modern Portfolio Theory occupies an important position in the investment management approaches. The theory is distinctive as its application enables investors to minimize the risk involved in investing in different classes of investment by diversifying it with the help of a portfolio. The portfolio is assumed to be a combination of various assets or various types of asset classes so as to take advantage of negative association among the returns of these investments. The Modern Portfolio Theory or MPT is applied on the basis of diversification, risk analysis and risk measurement with the help of beta and CAPM. It also assists an investor to determine an efficient portfolio of assets with the help of efficient frontier line method. This paper provides a study into the fundamentals of Modern Portfolio Theory propounded by Harry Markowitz. It examines and elaborates the important elements of this theory and evaluates its application such as diversification, risk and return analysis, risk measurement, beta and CAPM etc. The paper also is an attempt to analyze the techniques of stock valuation versus technical and fundamental analysis
