Modern Portfolio Optimization

Modern portfolio theory (MPT) is also called mean-variance portfolio theory. It is a major cornerstone of financial theory was awarded in 1990 based on this theoretical breakthrough. It was formulated in the 1950s. It is still a finance theory be using in practice today.

Financial Theory and Corporate Policy by Weston, Shastri, Copeland (2013) provides a good introduction to the formal topics associated with MPT.

It is important to notice that the assumption of normal distribution of the stock  returns is the foundation of MPT theory.