free market portfolio theory
TRANSCRIPT
The Free Market Portfolio Theory
Mark Matson Money
What is the Free Market Portfolio Theory?
• The synthesis of three academic principles– Efficient Market Hypothesis
– Modern Portfolio Theory
– The Three-Factor Model
Efficient Market Hypothesis
• Investors need to know that there is a choice to how they believe the market works
• Your market philosophy will dictate the investment strategy you take
• Do you perceive the market to be efficient or inefficient
Modern Portfolio Theory • Simply put the asset’s benefit to the portfolio
as an entity is more important than the single asset
• An Efficient Frontier helps to get the largest anticipated return value
for any possible volatility
The Three Factor Model
• Focuses on three functioning independent forms of equity returns– The Market Factor: Stock Risk vs. Fixed Income– The Size Effect: Risk of Small Cap Stocks over Large
Cap Stocks– The Value Effect: Extra risk of high book to market
over low book to market stocks
Three Parts
• Together the three principles give a more defined approach to investing
• Having the right insight is key to making smart financial steps
• Making a smarter more disciplined strategy is better for investments
Follow Up
• For more information on the Free Market Portfolio Theory and our company check us out here: http://aboutmatsonmoney.com/