Portfolio Diversification and Markowitz Theory Essay

Portfolio Diversification and Markowitz Theory - Essay Example However, there is a claim from Swisher & Kasten (2005) that a post-modern portfolio theory factoring in the role emotions and subjectivities has emerged but the leading journals do not confirm the claim. Gitman & Joehnk (1996, p. 670) attribute to Harry Markowitz, a trained mathematician, the development of the first set of theories â€Å"that form the basis of modern portfolio.† Modern portfolio theory is â€Å"an approach to portfolio management that uses statistical measures to develop a portfolio plan† (Gitman & Joehnk 1996, p. 670). Other than Markovitz, â€Å"several other scholars and investment experts have contributed to the theory in the intervening years† (Gitman & Joehnk 1996, p. 670). Gitman & Joehnk (1996, p. 671) identified that some of the key concepts used by the theory â€Å"are expected returns and standard deviations of returns for both securities and portfolios and the correlations between returns.† Gitman & Joehnk (1996, p. 673) point ed out that at the theoretical level, the optimal portfolio choice is made by an investor at the point of tangency between the investor’s indifference curve and his or her efficient frontier of investment. The efficient frontiers of investments consist of a set of combination of risks and returns deemed most acceptable to the investor. The investor is assumed to accept higher risks provided returns will be higher. This is shown in Figure 1 where the Is are the indifference curves of the investor associated with the investor’s utility. Figure 1. Indifference curves, efficient frontier, and optimal portfolio. Source: Gitman & Joehnk 1996, p.

CMG401 MOD 5 SLP Essay Example | Topics and Well Written Essays - 500 words

CMG401 MOD 5 SLP - Essay Example It is vital to read and comprehend the terms of the contract before signing it. This often looks like an overwhelming task, but it is beneficial to everyone, in the long run (Watson 125). This paper will examine the social economic responsibilities that apply to a government contract. An agreement by the government on goods and services that demands a formal, signed document will have to be honoured by the parties involved. There are economic implications that this failure can have on the business involved. The government may stop the funding of the project altogether, and demand some of it. This means that, the party involved will have spent capital that they need to refund because they failed to honour the contract. Another economic responsibility the contract may have on the procuring party is that; they need to execute the plans as per the terms of the contract (Nativel 153). This is lest they fail to give the government what they need. If the government wants a product and is written in the agreement, it is not the contractor’s responsibility to try and make it better or bigger than stipulated. Any failure to do as required may cause the government to not want the product offered because the specifications were not met. Social responsibility in a contract demands that there are fair stipulations that allow individuals to compete in the labour market. When agreeing on the terms of a contract, it is fundamental that the principals involved agree to the incentives provided. This is solely based on their ability to perform the task. Government contracts have incentives which push contractors to want to engage the government in their project (Nativel 157). However, the incentives may be too much to pass on such a contract. This forces contractors to agree to the agreement in question. This is even if they do not agree with the specifications. Contracts should have a social responsibility to the public and the contractors. There is the ability to