Modern Portfolio Theory

Harry Markowitz's 1952 framework that introduced mean-variance optimization. Showed that combining uncorrelated assets reduces total portfolio risk for any expected return. Won the 1990 Nobel Prize.

Rests on Gaussian-return assumptions and stable correlations — both shaky in real markets. Still the conceptual foundation of all institutional portfolio construction, even as practitioners use modifications (Black-Litterman, risk-parity, factor-based).