Hi. In this next set of videos, I'm going to talk a little bit about applying analytical techniques to modern portfolio theory. But before I begin, I want to mention a couple of things. For these next set of videos, I am going to emphasize the analytical side, the data-driven side, of applying modern portfolio theory along with the data set. This is not intended to be a full lecture on modern portfolio theory. So, for those of you who have had classes in investing or finance, some of this might seem elementary, but hopefully, you'll have all the necessary tools to do an analytical analysis. For those of you who have not taken a class in finance or investment theory, hopefully the set of lectures will give you enough information needed so that you can do your empirical analysis. By way of introduction, I'm going to be discussing modern portfolio theory, which was introduced by Harry Markowitz in 1952. He won the Nobel Prize for this in 1990 based on this work, and there are a couple key aspects to this theory. First, what is a portfolio? A portfolio is a collection or group of assets that are put together usually for some investment objective and also to satisfy a level of risk. The type of assets that can be fit into a portfolio includes stocks, bonds, currencies, and cash-like equivalence. It has been widely used in all areas of finance, but note that modern portfolio theory has also been extended to realms outside of finance, for example, people have used it to study the allocation of environmental resources in the best way possible. There are two underlying assumptions or objectives of modern portfolio theory. One is to maximize the expected returns based on a given level of risk. So, some assets are risky, and you can win big or lose big, but we are trying to maximize our expected returns with a set of underlying assets, and then secondly, the theory emphasizes that there is an inherent risk in the part of higher returns. So, if you want big returns, there's a lot more risk, and you can lose a lot more money. In conclusion, modern portfolio theory is an attempt to investigate or analyze the interrelationships between these different investments, trying to maximize the expected returns, and minimize the risk.