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Modern portfolio theory is a theory in the field of investment management that deals with the allocation of assets across various investments. It is a financial planning tool which helps investors to know how to invest their money in different asset classes and what type of returns they can expect.
The features of modern portfolio theory are:
- Minimize the risk and maximize the return
- Portfolio diversification
- Diversification by asset class, sector, or market
Portfolio theory has been used to evaluate students, professionals, and organizations throughout its history. This theory has been used to assess individuals in fields such as education, engineering, and marketing as well as companies such as Microsoft and Google.
The features of modern portfolio theory are:
1) It is designed for practical use
2) It is based on a career-long perspective
3) It emphasizes on the individual's ability
4) It focuses on competencies and skills
5) It also includes performance criteria
6) It includes a personal record
7) The evaluation process can be done with or without feedback
8 )It allows for self-assessment
Modern portfolio theory is a theory that suggests that the best way to evaluate a person’s performance is to judge them on their entire life, not just on their most recent work. The idea of modern portfolio theory was first proposed by William J. Baumol in 1967 and then further developed by Michael C. Jensen and William H. Meckling in 1976.
The features of modern portfolio theory are:
- A diverse set of activities that are relevant to the job at hand
- A mix of activities rather than focusing on one particular area
- An understanding of how much time it takes for each activity to complete
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