 True Markowitz or assumptions we break and why it mattersD. Sykes Wilford Review of Financial Economics, 2012, vol. 21, issue 3, 93-101 Abstract: Markowitz (1952, 1959) underlies modern corporate finance literature, from modern portfolio theory, option theory, to risk management (especially value at risk type methodologies). From it, Diversify has entered all languages, such is its power. Terms such as “the only free lunch” have become a way to give praise to Markowitz work. And, just as with all fundamental breakthroughs in the literature it has been extended many directions, sometimes not necessarily to the benefit of the original work, which often gets blamed when one rendition or another breaks down. With almost every MBA graduated believing they know what Markowitz optimization or portfolio theory means, it behooves us to step back and look at some of the basics, the assumptions that are made, the costs of breaking assumptions, and the potential disasters that can occur when those basics behind all of the theories dependent upon Markowitz' original work are ignored. Keywords: Asset allocation; Markowitz optimization; Markowitz; Fund management; Portfolios; Risk management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:21:y:2012:i:3:p:93-101 DOI: 10.1016/j.rfe.2012.06.003 Access Statistics for this article Review of Financial Economics is currently edited by T. K. Mukherjee and G. Whitney More articles in Review of Financial Economics from Elsevier |
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