Modern (MPT) and Post-Modern (PMPT) PortfolioTheory  

Harry Markowitz (1952/1957/1959) developed Modern P ortfolioTheory (MPT). Graph the Expected Return on the Portfolio (E(r)p)vs. th e Portfolio Standard Deviation (Show). Show the Rf rate,Capital Allocation Line (CAL), Ef ficient Frontier (EF) Umbrella,Tangency of the CAL/EF along with Utility Curves (U C), show howrisk- averse/institutional investors have to lower their utility toget to the Market Basket (M) tangency point. Show how you can moveup and down t he Efficient Frontier by buying/selling bonds toreallocate your portfolio b etween stocks and bonds, raising andlowing return and risk, how you can jump off the Ef ficientFrontier and up and down the CAL through the use of leverage orlending. And, sh ow how you can bow out the EF by allocating yourportfolio to Alternative Investment s (AI). Give examples of AIs,and what would be the target/model portfolio for the next 30 yearsfor risk-adjusted/institutional investors? Show how they can bebetter off using th e Inverse Coefficient of Variation (CV)Equation? What two objectives are you as the p ortfolio managertrying to achieve? Show how Cash Value Life Insurance (CVLI) as auniq ue alternative asset class can allow your clients portfolioreturn jump off the ef ficient frontier and onto a higher UtilityCurve (UC).

1. Normal Efficient Frontier (Positive Risk-Free Rate):

2. Normal Efficient Frontier (Negative Risk-Free Rate):