Modern (MPT) and Post-Modern (PMPT) Portfolio Theory

Harry Markowitz (1952/1957/1959) developed Modern P ortfolio Theory (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 how risk- averse/institutional investors have to lower their utility to get to the Market Basket (M) tangency point. Show how you can move up and down t he Efficient Frontier by buying/selling bonds to reallocate your portfolio b etween stocks and bonds, raising and lowing return and risk, how you can jump off the Ef ficient Frontier and up and down the CAL through the use of leverage or lending. And, sh ow how you can bow out the EF by allocating your portfolio to Alternative Investment s (AI). Give examples of AIs, and what would be the target/model portfolio for the next 30 years for risk-adjusted/institutional investors? Show how they can be better off using th e Inverse Coefficient of Variation (CV) Equation? What two objectives are you as the p ortfolio manager trying to achieve? Show how Cash Value Life Insurance (CVLI) as a uniq ue alternative asset class can allow your clients portfolio return jump off the ef ficient frontier and onto a higher Utility Curve (UC).

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

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