Based On The Growth Of The Principle Of Portfolio Theory

The diversification of the capital market leads to sharp increase of the investment risk. Under this circumstances, the Value Concept is adopted again by lots of business men and scholars. During investing, it's necessary to apply an appropriate theory to direct the investment behavior of the Value Concept. This paper presents a portfolio theory which is based on a principle of Growth Capability. Inheriting the main method of transfering risks of traditional portfolio theory, the paper enriches the definition and the method system of modern portfolio theory.Through analysing the firm's growth factors and making researches on the tow evaluation methods of firms, the paper put forward the theory of stock's evaluation and selection based on the Growth Principle. And it also formulates a model with beta coefficient which is the weight of Growth Capability restriction.After the above discusses, the paper concludes that over a long period, the Growth Capability is a scale for evaluating the stock's value, and the method based on it is critical for investors to gain stable profits and minimize the risk of investment.