15/10/2020 Harry Markowitz - Wikipedia

Harry Markowitz
Harry Max Markowitz (born August 24, 1927) is an American
economist, and a recipient of the 1989 John von Neumann Harry Markowitz
Theory Prize and the 1990 Nobel Memorial Prize in Economic Born Harry Max
Sciences. Markowitz
August 24, 1927
Markowitz is a professor of finance at the Rady School of Chicago, Illinois,
Management at the University of California, San Diego (UCSD).
U.S.
He is best known for his pioneering work in modern portfolio
theory, studying the effects of asset risk, return, correlation and Institution Harry Markowitz
diversification on probable investment portfolio returns. Company
Rady School of
Management at the
Contents University of
California, San
Biography Diego
CACI
Baruch College
Post CACI RAND Corporation
Research Cowles
Selected publications Commission

See also Field Financial

economics
References
School or Chicago School of
External links
tradition Economics
Alma mater University of
Biography Chicago (Ph.B.,
A.M, and Ph.D.)[1]
Harry Markowitz was born to a Jewish family, the son of Morris Doctoral Milton Friedman
and Mildred Markowitz.[2] During high school, Markowitz advisor Jacob Marschak
developed an interest in physics and philosophy, in particular the
ideas of David Hume, an interest he continued to follow during Influences Tjalling Koopmans
his undergraduate years at the University of Chicago. After Leonard Savage
receiving his Ph.B. in Liberal Arts,[1] Markowitz decided to Contributions Modern portfolio
continue his studies at the University of Chicago, choosing to theory
specialize in economics. There he had the opportunity to study Efficient frontier
under important economists, including Milton Friedman, Sparse matrix
Tjalling Koopmans, Jacob Marschak and Leonard Savage. While
methods
still a student, he was invited to become a member of the Cowles
SIMSCRIPT
Commission for Research in Economics, which was in Chicago at
the time. He completed his A.M. in Economics from the Awards John von Neumann
university in 1950.[1] Theory Prize (1989)
The Sveriges
Markowitz chose to apply mathematics to the analysis of the Riksbank Prize in
stock market as the topic for his dissertation. Jacob Marschak,
Economic Sciences
who was the thesis advisor, encouraged him to pursue the topic,
in Memory of Alfred
noting that it had also been a favorite interest of Alfred Cowles,
the founder of the Cowles Commission. While researching the Nobel (1990)

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then current understanding of stock prices, which at the time Information (https://ideas.repec.org/
consisted in the present value model of John Burr Williams, e/pma73.html) at IDEAS / RePEc
Markowitz realized that the theory lacks an analysis of the impact
of risk. This insight led to the development of his seminal theory of portfolio allocation under
uncertainty, published in 1952 by the Journal of Finance.[3]

In 1952, Harry Markowitz went to work for the RAND Corporation, where he met George Dantzig.
With Dantzig's help, Markowitz continued to research optimization techniques, further developing
the critical line algorithm for the identification of the optimal mean-variance portfolios, relying on
what was later named the Markowitz frontier. In 1954, he received a PhD in Economics from the
University of Chicago[1] with a thesis on the portfolio theory. The topic was so novel that, while
Markowitz was defending his dissertation, Milton Friedman argued his contribution was not
economics.[4] During 1955–1956 Markowitz spent a year at the Cowles Foundation,[2] which had
moved to Yale University, at the invitation of James Tobin. He published the critical line algorithm in
a 1956 paper and used this time at the foundation to write a book on portfolio allocation which was
published in 1959.[5]

Markowitz won the Nobel Memorial Prize in Economic Sciences in 1990 while a professor of finance
at Baruch College of the City University of New York. In the preceding year, he received the John von
Neumann Theory Prize from the Operations Research Society of America (now Institute for
Operations Research and the Management Sciences, INFORMS) for his contributions in the theory of
three fields: portfolio theory; sparse matrix methods; and simulation language programming
(SIMSCRIPT). Sparse matrix methods are now widely used to solve very large systems of
simultaneous equations whose coefficients are mostly zero. SIMSCRIPT has been widely used to
program computer simulations of manufacturing, transportation, and computer systems as well as
war games. SIMSCRIPT (I) included the Buddy memory allocation method, which was also developed
by Markowitz. He was elected to the 2002 class of Fellows of the Institute for Operations Research
and the Management Sciences.[6]

CACI

The company that would become CACI International was founded by Herb Karr and Harry
Markowitz on July 17, 1962 as California Analysis Center, Inc. They helped develop SIMSCRIPT, the
first simulation programming language, at RAND and after it was released to the public domain,
CACI was founded to provide support and training for SIMSCRIPT.[7]

In 1968, Markowitz joined Arbitrage Management company founded by Michael Goodkin. Working
with Paul Samuelson and Robert Merton he created a hedge fund that represents the first known
attempt at computerized arbitrage trading. He took over as chief executive in 1970. After a successful
run as a private hedge fund, AMC was sold to Stuart & Co. in 1971. A year later, Markowitz left the
company.[8]

Years later, he was involved with CACI's SIMSCRIPT addition of Object-oriented features.[9]

Post CACI

Markowitz divides his time between teaching (he is an adjunct professor at the Rady School of
Management at the University of California at San Diego, UCSD); video casting lectures; and
consulting (out of his Harry Markowitz Company offices). He currently serves on the Advisory Board
of SkyView Investment Advisors, a traditional and alternative investment advisory firm. Markowitz
also serves on the Investment Committee of LWI Financial Inc. ("Loring Ward"), a San Jose,
California-based investment advisor; on the advisory panel of Robert D. Arnott's Newport Beach,
California based investment management firm, Research Affiliates; on the Advisory Board of Mark
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Hebner's Irvine, California and internet based investment advisory firm, Index Fund Advisors; and as
an advisor to the Investment Committee of 1st Global, a Dallas, Texas-based wealth management and
investment advisory firm. Markowitz advises and serves on the board of ProbabilityManagement.org,
a 501(c)(3) non-profit founded by Dr. Sam L. Savage to reshape the communication and calculation
of uncertainty.[10]

Markowitz is co-founder and Chief Architect of GuidedChoice, a 401(k) managed accounts provider
and investment advisor.[11] Markowitz's more recent work has included designing the backbone
software analytics for the GuidedChoice investment solution and heading the GuidedChoice
Investment Committee. He is actively involved in designing the next step in the retirement process:
assisting retirees with wealth distribution through GuidedSpending.

Research
A Markowitz-efficient portfolio is one where 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. In the same line, Markowitz is part of the Editorial
Board of AESTIMATIO,[12] the IEB International Journal of Finance.[13]

Selected publications
Markowitz, H.M. (March 1952). "Portfolio Selection". The Journal of Finance. 7 (1): 77–91.
doi:10.2307/2975974 (https://doi.org/10.2307%2F2975974). JSTOR 2975974 (https://www.jstor.o
rg/stable/2975974).
Markowitz, H.M. (April 1952). "The Utility of Wealth" (http://cowles.econ.yale.edu/P/cp/p00b/p005
7.pdf) (PDF). The Journal of Political Economy (Cowles Foundation Paper 57). LX (2): 151–158.
doi:10.1086/257177 (https://doi.org/10.1086%2F257177).
Markowitz, H.M. (April 1957). "The Elimination Form of the Inverse and Its Application to Linear
Programming" (http://www.dtic.mil/get-tr-doc/pdf?AD=AD0604711). Management Science. 3 (3):
255–269. doi:10.1287/mnsc.3.3.255 (https://doi.org/10.1287%2Fmnsc.3.3.255).
Markowitz, H.M. (1959). Portfolio Selection: Efficient Diversification of Investments (http://cowles.
econ.yale.edu/P/cm/m16/index.htm). New York: John Wiley & Sons. (reprinted by Yale University
Press, 1970, ISBN 978-0-300-01372-6; 2nd ed. Basil Blackwell, 1991, ISBN 978-1-55786-108-5)
Markowitz, H.M. (October 1, 1979). Belzer, Jack; Holzman, Albert G.; Kent, Allen (eds.).
"SIMSCRIPT", Encyclopedia of Computer Science and Technology. 13. New York and Basel:
Marcel Dekker. p. 516. ISBN 978-0-8247-2263-0.
Markowitz, H.M. and E. van Dijk (March–April 2003). "Single-Period Mean-Variance Analysis in a
Changing World". Financial Analysts Journal. 59 (2): 30–44. doi:10.2469/faj.v59.n2.2512 (https://
doi.org/10.2469%2Ffaj.v59.n2.2512).
Markowitz, H.M. (September–October 2005). "Market Efficiency: A Theoretical Distinction and So
What?" (http://www.researchaffiliates.com/ideas/pdf/marketEfficiency.pdf) (PDF). Financial
Analysts Journal. 61 (5): 17–30. doi:10.2469/faj.v61.n5.2752 (https://doi.org/10.2469%2Ffaj.v61.n
5.2752).
Markowitz, H.M. (2009). Harry Markowitz: Selected Works (https://web.archive.org/web/20110223
194057/http://www.worldscibooks.com/economics/6967.html). World Scientific-Nobel Laureate
Series: Vol. 1. Hackensack, New Jersey: World Scientific. p. 716. ISBN 978-981-283-364-8.
Archived from the original (http://www.worldscibooks.com/economics/6967.html) on February 23,
2011. Retrieved March 24, 2009.

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15/10/2020 Harry Markowitz - Wikipedia

See also
List of economists
List of Jewish Nobel laureates
Risk management tools
Harry Markowitz official website (http://hmarkowitz.com/)

References
1. "Curriculum Vitae (Harry M. Markowitz)" (http://hmarkowitz.com/cv/). hmarkowitz.com. Retrieved
December 12, 2017.
2. Harry M. Markowitz – Autobiography (http://nobelprize.org/nobel_prizes/economics/laureates/199
0/markowitz-autobio.html), The Nobel Prizes 1990, Editor Tore Frängsmyr, [Nobel Foundation],
Stockholm, 1991
3. Markowitz, H.M. (March 1952). "Portfolio Selection". The Journal of Finance. 7 (1): 77–91.
doi:10.2307/2975974 (https://doi.org/10.2307%2F2975974). JSTOR 2975974 (https://www.jstor.o
rg/stable/2975974).
4. Harry M. Markowitz – Nobel Prize Lecture: Foundations of Portfolio Theory (http://nobelprize.org/
nobel_prizes/economics/laureates/1990/markowitz-lecture.html), December 7, 1990 ( PDF format
(http://nobelprize.org/nobel_prizes/economics/laureates/1990/markowitz-lecture.pdf))
5. Markowitz, H.M. (1959). Portfolio Selection: Efficient Diversification of Investments (http://cowles.
econ.yale.edu/P/cm/m16/index.htm). New York: John Wiley & Sons. (reprinted by Yale University
Press, 1970, ISBN 978-0-300-01372-6; 2nd ed. Basil Blackwell, 1991, ISBN 978-1-55786-108-5)
6. Fellows: Alphabetical List (https://web.archive.org/web/20190510220119/https://www.informs.org/
Recognizing-Excellence/Fellows/Fellows-Alphabetical-List), Institute for Operations Research and
the Management Sciences, archived from the original (https://www.informs.org/Recognizing-Excel
lence/Fellows/Fellows-Alphabetical-List) on May 10, 2019, retrieved October 9, 2019
7. William G. Shepherd Jr. (September 1988). "Market Value - PCs on Wall Street". PC Computing.
pp. 150–157.
8. Goodkin, Michael. The Wrong Answer Faster: The Inside Story of Making the Machine that
Trades Trillions. John Wiley & Sons, 2012
9. Harry M. Markowitz (2009). Selected Works (https://books.google.com/books?
isbn=981447021X). p. 152. ISBN 978-9814470216. "I told Ana Marjanski, who headed the
SIMSCRIPT III project, that SIMSCRIPT already has entities, attributes plus sets. She explained
that the clients want object ..."
10. "Probability Management" (http://www.ProbabilityManagement.org).
11. GuidedChoice, "Harry Markowitz’s Modern Portfolio Theory: The Efficient Frontier" (https://www.g
uidedchoice.com/video/dr-harry-markowitz-father-of-modern-portfolio-theory/)
12. "Editorial Board of AESTIMATIO - IEB Instituto de Estudios Bursátiles" (https://www.ieb.es/investi
gacion/international-journal-of-finance/editorial-board/).
13. "AESTIMATIO, the IEB International Journal of Finance" (https://www.ieb.es/investigacion/internat
ional-journal-of-finance/).

External links
Harry Markowitz: Videos of Interviews by Mark Hebner and Weston Wellington and Presentations
by Professor Markowitz (http://harrymarkowitzinterviews.com)
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 1990 (http://nobel
prize.org/nobel_prizes/economics/laureates/1990/index.html)
Harry M. Markowitz (https://www.nobelprize.org/laureate/704) on Nobelprize.org

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Banquet Speech (http://nobelprize.org/nobel_prizes/economics/laureates/1990/markowitz-spe

ech.html), December 10, 1990
Nobel Prize Lecture: Foundations of Portfolio Theory (http://nobelprize.org/nobel_prizes/econ
omics/laureates/1990/markowitz-lecture.html), December 7, 1990 ( PDF format (http://nobelpri
ze.org/nobel_prizes/economics/laureates/1990/markowitz-lecture.pdf))
Oral history interview with Harry M. Markowitz (http://purl.umn.edu/107467), Charles Babbage
Institute, University of Minnesota – Markowitz discusses his development of portfolio theory,
sparse matrices, and his work at the RAND Corporation and elsewhere on simulation software
development (including computer language SIMSCRIPT), modeling, and operations research.
History of Finance, interviews (https://web.archive.org/web/20161112043336/http://www.afajof.or
g/details/videoListing/2866801/Masters-of-Finance-Videos.html), The American Finance
Association
Guide to the Harry M. Markowitz Papers 1963, 1965, 1967 (https://www.lib.ncsu.edu/findingaids/
mc00408)
Adjunct Professor of Finance, bio (http://rady.ucsd.edu/faculty/directory/markowitz/), Rady School
of Management, University of California at San Diego
1st Global Engages Dr. Harry M. Markowitz (https://web.archive.org/web/20110707060512/http://
www.1stglobal.com/pressReleases/story.asp?intStoryID=976), 1st Global
"Harry Markowitz (1927– )" (http://www.econlib.org/library/Enc/bios/Markowitz.html). The Concise
Encyclopedia of Economics. Library of Economics and Liberty (2nd ed.). Liberty Fund. 2008.
http://people.maths.ox.ac.uk/~zhouxy/download/mvjump_part2.pdf
http://home.dacor.net/norton/finance-math/problems_w_Markowitz.pdf
Biography of Harry Markowitz (https://www.informs.org/content/view/full/269373) from the Institute
for Operations Research and the Management Sciences

Awards
Laureate of the Nobel Memorial Prize
in Economics
Preceded by Succeeded by
1990
Trygve Haavelmo Ronald H. Coase
Served alongside: Merton H. Miller, William
F. Sharpe

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