Portfolio theory,as initially developed by Markowitz (1952),assumes that the returns from investments are normally distributed.

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Portfolio theory indeed assumes that the returns from investments are normally distributed, which means they follow a bell curve pattern. This assumption is crucial in calculating risk and return measures, such as variance and expected return, and in constructing optimal portfolios that maximize returns for a given level of risk. However, in practice, the actual distribution of returns may deviate from normality due to various factors, such as market shocks, fat tails, and non-linear dependencies. Hence, portfolio theory may not fully capture the risks and opportunities of real-world investments, and alternative methods, such as robust optimization and machine learning, are being developed to enhance its applicability and reliability.

Portfolio Theory,as Initially Developed by Markowitz (1952),assumes That the Returns