Portfolio Theory: As I Still See It

Harry Markowitz

Annual Review of Financial Economics, 2010, vol. 2, issue 1, 1-23

Abstract: This essay summarizes my views on (a) the foundations of portfolio theory and its applications to current issues, such as the choice of criteria for practical risk-return analysis, and whether some form of risk-return analysis should be used in fact; (b) hypotheses about actual financial behavior, as opposed to idealized rational behavior, including two proofs of the fact that expected-utility maximizers would never prefer a multiple-prize lottery to all single-prize lotteries, as asserted in one of my 1952 papers; and (c) a simple proof of the theorem (which was initially greeted with some skepticism, especially by referees) that investors in capital asset pricing models do not get paid for bearing risk.

Keywords: MPT; Friedman-Savage; prospect theory; stochastic dominance; capital asset pricing model (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2010
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