Chapter 21: Portfolio Theory and Investment Management

Thomas W. Harvey

Portfolio theory and investment management The objective of this chapter is to help readers understand theories of portfolio management. Investment, as opposed to consumption, is the commitment of funds that the investor believes will appreciate in value over time and will provide a return that is sufficient for assuming risk and for exceeding the effects of inflation. This chapter begins by reviewing theories of investment and portfolio management that have been prevalent throughout the twentieth century. First, it reviews the firm foundation theories of Benjamin Graham and David Dodd, developed in their seminal book, Security Analysis , published in 1934. Following Graham and Dodd was John Burr Williams's (1938) theory of investment value, which added further sophistication to the Graham and Dodd calculation and which became one of the more common contemporary valuation techniques for equity securities. And then, the work of Harry Markowitz (1952) on expected utility theory, modern ...

Users without subscription are not able to see the full content on this title. Please, subscribe or login to access all content on this website.

• Buy The Book