Harry Markowitz

Born	July 24 1927 (1927--) (age 80) Chicago
Residence	U.S.
Nationality	U.S.
Field	Finance
Institutions	Rady School of Management
Alma mater	University of Chicago
Academic advisor	Jacob Marschak
Known for	Modern portfolio theory Markowitz frontier
Notable prizes	Nobel Prize in Economics (1990) John von Neumann Prize (1989)

Harry Max Markowitz (born August 24, 1927) is an influential economist at the Rady School of Management at the University of California, San Diego. He is best known for his pioneering work in modern portfolio theory, studying the effects of asset risk, correlation and diversification on expected investment portfolio returns.

Biography

Harry Markowitz^[1] was born on August 24, 1927 in Chicago, as the child of Morris and Mildred Markowitz. During highschool, Markowitz picked up an interest in physics and philosophy, in particular the ideas of David Hume, an interest he continued to follow during his undergraduate years at the University of Chicago. After receiving his B.A., Markowitz decided to continue his studies at the University of Chicago, choosing to specialise in economics. Here, he had the opportunity to study under important economists, among which Milton Friedman, Tjalling Koopmans, Jacob Marschak and Leonard Savage. While still a student, he was invited to become a member of the Cowles Commission, which was in Chicago at the time.

Markowitz chose to apply mathematics to the analysis of the stock market as the topic for his dissertation. Jacob Marschak, who was the thesis advisor, encouraged him to pursue the topic, noting that it had also been a favourite interest of Alfred Cowles, the founder of the Cowles Commission. While researching the then current understanding of stock prices, which at the time consisted in the present value model of John Burr Williams, Markowitz realized that the theory lacks an analysis of the impact of risk. This insight lead to the development of his seminal theory of portfolio allocation under uncertainty, published in 1952 by the Journal of Finance^[2].

In 1952 Harry Markowitz went to work for the RAND Corporation, where he met George Dantzig. With Dantzig's help, Markowitz started to research optimisation techniques, developing the critical line algorithm for the identifications of the optimal mean-variance portfolios, lying on what was later named the Markowitz frontier. In 1955 he received a PhD from the University of Chicago with a thesis on the portfolio theory. The topic was so novel that, while Markowitz was defending his dissertation, Milton Friedman jokingly argued that portfolio theory was not economics^[3]. During 1955-1956 Markowitz spent a year at the Cowles Foundation^[1], which had moved to Yale University, at the invitation of James Tobin. He published the critical line algorithm in a 1956 paper and used the time at the foundation to write a book on portfolio allocation which was published in 1959^[2].

Markowitz won the Nobel Prize in Economics in 1990 while a professor of finance at Baruch College of the City University of New York. He currently serves on the advisory panel of Robert D. Arnott's Pasadena, California based investment management firm, Research Affiliates.

Research

A Markowitz Efficient Portfolio is one where no added diversification can lower the portfolio's risk for a given return expectation (alternately, no additional expected return can be gained without increasing the risk of the portfolio). The Markowitz Efficient Frontier is the set of all portfolios that will give the highest expected return for each given level of risk. These concepts of efficiency were essential to the development of the Capital Asset Pricing Model.

Markowitz also co-edited the textbook The Theory and Practice of Investment Management with Frank J. Fabozzi of Yale School of Management.

Selected publications

• Markowitz, Harry M. (1952). "Portfolio Selection". Journal of Finance 7 (1): 77-91. 
• Markowitz, Harry M. (1956). "The optimization of a quadratic function subject to linear constraints". Naval Research Logistics Quarterly 3: 111-133. 
• Markowitz, Harry M. (1959). Portfolio Selection: Efficient Diversification of Investments. John Wiley & Sons, New Jersey.  (reprinted in 1970 by Yale University Press, ISBN 978-0300013726; second edition in 1991, Blackwell Publishing, ISBN 978-1557861085)

Notes and references

External links

• Profile on the official Nobel Foundation website
• Full text of Harry Markowitz (1959), Portfolio Selection: Efficient Diversification of Investments on the Cowles Foundation website

•  • [ e] Nobel Memorial Prize in Economics Laureates
Milton Friedman (1976) • Bertil Ohlin / James Meade (1977) • Herbert Simon (1978) • Theodore Schultz / William Arthur Lewis (1979) • Lawrence Klein (1980) • James Tobin (1981) • George Stigler (1982) • Grard Debreu (1983) • Richard Stone (1984) • Franco Modigliani (1985) • James M. Buchanan (1986) • Robert Solow (1987) • Maurice Allais (1988) • Trygve Haavelmo (1989) • Harry Markowitz / Merton Miller / William Forsyth Sharpe (1990) • Ronald Coase (1991) • Gary Becker (1992) • Robert Fogel / Douglass North (1993) • John Harsanyi / John Forbes Nash / Reinhard Selten (1994) • Robert Lucas, Jr. (1995) • James Mirrlees / William Vickrey (1996) • Robert C. Merton / Myron Scholes (1997) • Amartya Sen (1998) • Robert Mundell (1999) • James Heckman / Daniel McFadden (2000)

Persondata
NAME	Markowitz, Harry
ALTERNATIVE NAMES	Markowitz, Harry Max
SHORT DESCRIPTION	American economist
DATE OF BIRTH	August 24, 1927
PLACE OF BIRTH	Chicago
DATE OF DEATH
PLACE OF DEATH