Building Blocks of the Modern Portfolio Theory
Assoc. Prof. Dr. Huseyin Yilmaz

Abstract
Markowitz brings to portfolio theory variance, covariance, and diversification. Adding these concepts adds different opinions and vision to portfolio analysis. Roy accepts the importance of diversification and low variance for portfolio analysis. Roy also accepts that a disaster level that is a level under which the investor should not invest in an asset. If the estimated price is less than the critical price, then either he should reject this asset altogether or he should contract liabilities in this form if this is possible. Tobin accepts that risk averters are actually diversifiers. One of the baskets of the two baskets covers consoles which are risky. If proportion of consoles is increased, risk and return of the portfolio which covers cash and consoles increases, too. He sees cash a tool to decrease risk of a portfolio.

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