Modern Portfolio Theory (MPT)
Definition of Modern Portfolio Theory (MPT)
Related Terms
Intraday Trading
Capital Gains
Say someone buys a share for Rs. 1000 and sells it for Rs. 1100. The capital gains will be Rs. 100 in this case. The taxation of capital gains varies based on the asset type and the duration after which it was sold.
Beta Coefficient
The formula to calculate the Beta coefficient is:
Beta (β) = Covariance (Ri, Rm) / Variance (Rm)
Where:
- Ri = a stock's return
- Rm = overall market's return
- Covariance = ups & downs of stock returns versus ups & downs of market returns
- Variance = the difference between market returns and its average
Generally, Beta values are of four types:
- Beta < 1.0: stock less volatile than the market
- Beta = 1.0: stock just as volatile as the market
- Beta > 1.0: stock more volatile than the market
- Negative Beta: stock shares inverse relation with the market

