What are the assumptions of modern portfolio theory?

QuestionsWhat are the assumptions of modern portfolio theory?
Akshaj Singh asked 3 months ago
3 Answers
Deepak Goyal answered 3 months ago
Modern portfolio theory is a theory that helps us understand the nature of investment in an economy. It is a tool to analyze the relationship between an investor and the asset they are investing in. The assumptions of modern portfolio theory are as follows: - Investors hold diversified portfolios of investments, which can be categorized into three types: stocks, bonds, and cash. - Investors have different risk tolerance levels and are willing to accept different levels of risk for their investments.  - The amount invested in each asset depends on its expected return and risk level. - The returns from each investment are independent from one another. 
Nikhil Rawat answered 3 months ago
Modern portfolio theory is a theory that emerged in the 1930s and has been used in the field of economics. It is a tool for assessing risk and return for investments. The theory has three basic assumptions: - There are many investors with different levels of risk tolerance and returns. - Investors have different time horizons and thus require different levels of return on their investments. Longer time horizons require higher returns than shorter ones. - There is always uncertainty in the market, which means that there will always be some risk involved with any investment decision made  
Priya Vishwas answered 3 months ago
There are many assumptions on which the theory of modern portfolio is based. Some of them are: Assumption 1: The idea of a portfolio is a new one Assumption 2: A portfolio should be composed of different projects Assumption 3: modern portfolio theory is that it can be used as a tool to evaluate the skills and competencies of an individual.