Fundamental principles of modern portfolio theory and option pricing

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The starting point for modern portfolio theory is the efficient market hypothesis. This comes in three forms but it can be summarized simply in the statement that it is extremely difficult for the ordinary investor to make money from trading in shares. This is hardly a concept which is likely to upset the typical investment manager. That is until he works out the corollary:- such a high proportion of the money invested in the Stock Exchange is professionally managed that he (the investment manager) may be an ordinary investor.