Harry Markowitz
Harry Markowitz
Full Name and Common Aliases
Harry Max Markowitz was born on August 15, 1927, in Chicago, Illinois.
Birth and Death Dates
Born: August 15, 1927
Passed away: July 29, 2023 (aged 95)
Nationality and Profession(s)
Markowitz was an American economist, Nobel laureate, and professor who made significant contributions to the field of finance. He is widely recognized for his work on modern portfolio theory (MPT) and its application in investment management.
Early Life and Background
Growing up during the Great Depression had a profound impact on Markowitz's understanding of economic uncertainty and risk. His father, a Polish immigrant, struggled to make ends meet, which instilled in Harry a strong appreciation for frugality and financial responsibility. Markowitz's academic prowess was evident from an early age; he graduated valedictorian from his high school class and went on to study at the University of Chicago.
Major Accomplishments
Markowitz's groundbreaking work on modern portfolio theory revolutionized the field of finance by introducing a mathematical framework for optimizing investment portfolios. His seminal paper, "Portfolio Selection," published in 1952, laid the foundation for this theory. Markowitz was awarded the Nobel Memorial Prize in Economic Sciences in 1990 for his contributions to the development of MPT.
Notable Works or Actions
Some notable works and actions that demonstrate Markowitz's impact on finance include:
Portfolio Selection (1952) - a paper that introduced modern portfolio theory, which enabled investors to assess risk more accurately.
Nobel Memorial Prize in Economic Sciences (1990) - awarded for his pioneering work on MPT.
* Contributions to the development of asset pricing models, including the Capital Asset Pricing Model (CAPM).
Impact and Legacy
Markowitz's work has had a lasting impact on the financial industry, influencing investment decisions globally. His emphasis on diversification and risk management principles remains essential for investors today. The Nobel Committee recognized his contributions as "fundamental to our understanding of capital markets."
Why They Are Widely Quoted or Remembered
Harry Markowitz is widely quoted and remembered for his pioneering work in modern portfolio theory, which has shaped the investment landscape. His emphasis on risk management and diversification principles continues to guide investors in making informed decisions.
Quotes by Harry Markowitz
In choosing a portfolio, investors should seek broad diversification, Further, they should understand that equities – and corporate bonds also – involve risk; that markets inevitably fluctuate; and their portfolio should be such that they are willing to ride out the bad as well as the good times.
It’s like a crapshoot in Las Vegas, except in Las Vegas the odds are with the house. As for the market, the odds are with you, because on average over the long run, the market has paid off.
A good portfolio is more than a long list of good stocks and bonds. It is a balanced whole, providing the investor with protections and opportunities with respect to a wide range of contingencies.
To reduce risk it is necessary to avoid a portfolio whose securities are all highly correlated with each other. One hundred securities whose returns rise and fall in near unison afford little protection than the uncertain return of a single security.
In choosing a portfolio, investors should seek broad diversification, Further, they should understand that equities--and corporate bonds also--involve risk; that markets inevitably fluctuate; and their portfolio should be such that they are willing to ride out the bad as well as the good times.
Perhaps the most important job of a financial advisor is to get their clients in the right place on the efficient frontier in their portfolios. But their No. 2 job, a very close second, is to create portfolios that their clients are comfortable with. Advisors can create the best portfolios in the world, but they won't really matter if the clients don't stay in them.
It's like a crapshoot in Las Vegas, except in Las Vegas the odds are with the house. As for the market, the odds are with you, because on average over the long run, the market has paid off.
We next consider the rule that the investor does or should consider expected return a desirable thing and variance of return an undesirable thing.
In 1989, I was awarded the Von Neumann Prize in Operations Research Theory by the Operations Research Society of America and The Institute of Management Sciences. They cited my works in the areas of portfolio theory, sparse matrix techniques and the SIMSCRIPT programming language.
During the 1950s, I decided, as did many others, that many practical problems were beyond analytic solution and that simulation techniques were required. At RAND, I participated in the building of large logistics simulation models; at General Electric, I helped build models of manufacturing plants.