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The Pros And Cons Of Portfolio Theories

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V. PRESENT TIMES MOST PROMISING PORFOLIO STRATEGY
This section reaches out to capture and answer the initial question of what the present times most promising portfolio theories, set to replace Modern Portfolio Theory, are. Due to the complexity of this question and the high potential of having a personal bias in investment preferences, I want to divide the answer into two parts, providing two separate answers. The first statement will answer the question from an academic point of view (“theory”) and the second will give a more hands-on answer (“practice”) to it.
A. ACADEMIC SUGGESTION – “THEORY”
From an academic point of view, it is interesting to see the development from a Single Factor Model of Markowitz over Multi Factor Models to a Third …show more content…

This suggestion focuses on the securities falling into this value investment category. How the portfolio will be optimized in the end and what specific securities have been qualified as value investments is secondary and falls into the action scope of the investor, depending on the preference of the portfolio theory. In the end, even using MPT is as much conceivable as the application of AMH and as much conceivable as investing in all securities, that have been qualifies as value investment, equally weighted. Studies about value investment have constructed simple value portfolios by screening all stocks of a desired index according to value constraints and have invested equally weighted in the most promising quintile, for …show more content…

CONCLUSION
Over the last 60 years of portfolio theory history, the industry, investors and academia have gone a long way. Today, due to the simplicity and ease of application, the ideas of Modern Portfolio Management and Markowitz are still in place, regardless of their weaknesses.
The most promising portfolio theory to replace Modern Portfolio Theory and reshape the way we see and understand the markets is the Adaptive Market Hypothesis, with its descriptive capability. However, the Adaptive Market Hypothesis is yet just partly comprehensible.
From the practical viewpoint the value investment approach is a seasoned approach for stocks and companies but lacks the ability of being applied to all asset classes.
As of today it seems like MPT will keep its spotlight for some more time because of the complexity of more complete models and the cumbersome applicability of those theories compared to MPT. The ease and simplicity of MPT as its comparative advantage will protect its supremacy for some more time in the future. ABSTRACT
This paper examines the alternative investment strategies diverging from Modern Portfolio Theory and reaches out to find today’s most promising portfolio theories that have the inherent capacity to replace Modern Portfolio Theory in its wide-ranging application. Academia is in agreement about that Modern Portfolio Theory is obsolete but yet all other portfolio theories struggled in replacing

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