The owners value shares at less than the proportional value of underlying assets on the theory that fractional interests in a portfolio are not worth as much to outsiders.

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Today modern portfolio theory is used to justify the inclusion of even the riskiest assets in significant percentages.

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Translated into investment theory, this means investors should aim to hold a portfolio of assets whose returns are not highly correlated.

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The CAPM theory assumed that the portfolio would hold an amount of risk free assets plus it would embrace all risky assets weighted by their market capitalization.

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