Abstract: There are two fatal flaws to measure the exposure with variance in Markowitz’s M-V Model.In order to measure the exposure in a more accurate way,the author brings forward the concept of SemiA.D,and makes improvement to the M-V Model with it.After analyzing the recovered prices of 50 typical stocks in Shanghai Securities Exchange,we conclude that on every expected rate of return,the portfolios based on M-SemiA.D Model are unexceptionally superior to those based on M-V Model,and the effective portfolio satisfies the "Two Funds Separation Theorem".

Key words: portfolio, two funds separation theorem, elasticity of risks, semi average deviation(semiA.D)