Hello again, Fung,

Thank you for the explanation and clarifying your point of view. It sounds as if you are looking at individual securities and their prices eventually reflecting underlying business performance. However, that is different than the fluctuations of the overall equity market, for which MPT seeks to describe the underlying behavior, and that any rival theory should seek to explain, too. Embedded in the assumption that a security's price reflects the underlying performance of the issuer is that you have ascribed a fair value to the security and that you have purchased it at a discount to your estimate of fair value. This is a quite different proposition than looking at the overall movements of a market.

With smiles,

Jason