Harry Markowitz

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Harry Markowitz

One of the first economists to apply mathematics to the operations of the stock market. A student of the Chicago School, he theorized that every rational investor, at a given level of risk, will accept only the largest expected return. This led him to develop Modern, or Markowitz, Portfolio Theory, which attempted to account for risk and expected return mathematically to help the investor find a portfolio with the maximum return for the minimum about of risk. A Markowitz efficient porfolio represented just that: the most expected return at a given amount of risk (excluding zero risk, though later economists explored zero-risk investments in the context of Markowitz's work). He first explored this theory in an article published in 1952 and received the Nobel prize for economics for his work in 1990. See also: Homogenous expectations assumption, Markowitz efficient set of portfolios.