received the Nobel Prize in Economic Sciences for his work on investment risk and return, and is recognized as the father of modern portfolio theory.
Early in the 1950s Harry Markowitz
suggested that asset allocation accounts for approximately 90% of portfolio performance on a risk-adjusted basis, a figure that has been borne out repeatedly by subsequent studies, and, incidentally, earned him a Nobel Prize for Economics in 1990.
Rosenfeld described the way they've laid the matrix out, and the way they determine the suppliers with which they'll work, as a financial portfolio, and said that they're deploying a model devised by a Nobel Prize-winning economist, Harry Markowitz
Both were used by Harry Markowitz
in his 1959 book Portfolio Selection, which won him a Nobel Prize and caused these measures to be enshrined in MBA textbooks.
(1) suggested that the latter could be diversified away, meaning that by buying more than one share you must reduce the risk of outright failure.
Fifty years ago, Harry Markowitz
, then a graduate student at the University of Chicago, developed a keen insight that risk (which he defined as volatility) must be the central focus for the whole process of investing.
and Merton Miller developed MPT in 1952 and William Sharpe expanded on it later; the three won the 1990 Nobel Prize for Economics for their contribution to investment methodology.
All the others--Robert Fogel, James Heckman, Robert Lucas, Harry Markowitz
, Robert Merton, Douglass North, and William Sharpe--indicated either directly or through assistants that they did not want to get involved.
candidate named Harry Markowitz
began researching the role of risk in the process of investing.
When economic historians write this century's story, they no doubt will mention the insights of Lord Keynes, the free-market musings of Milton Friedman, the econometric models of Wassily Leontief, and the portfolio theories of Harry Markowitz
Kaplan also interviews industry luminaries who have greatly influenced the evolution of asset allocation, including Harry Markowitz
, Roger Ibbotson, and the late Benoit Mandelbrot.
Since Harry Markowitz
published his Journal of Finance paper creating Modern Portfolio Theory in 1952, asset allocation, risk management and diversification have become the governing principles for portfolio construction.