This is a classic book, representing the first major breakthrough in the field of modern financial theory. In effect, it created the mathematics of portfolio selection in a model which has turned out to be the indispensable building block from which the theory of the demand for risky securities is constructed.
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"Modern portfolio theory gives a rigorous mathematical justification for the time honored investment maxim that diversification is a sensible strategy for individuals who wish to reduce their risks. Invented in the 1950s by Harry Markowitz in this book, the theory provides a firm foundation for the intuition that you should not put all your eggs in one basket and shows investors how to combine securities to minimize risk." Butron G Malkiel, author of "A Random Walk Down Wall Street"
"In every field of study it is possible to look back and identify a person or event that caused a major change in the direction or development of the field. In investments it is clear that the seminal work by Harry Markowitz on portfolio theory changed the field more than any other single event." Frank K. Reilly, University of Notre Dame, Indiana
From the Back Cover
This is a classic book, representing the first major breakthrough in the field of modern financial theory. In effect, it created the mathematics of portfolio selection in a model which has turned out to be the indispensable building block from which the theory of the demand for risky securities is constructed. It also became an essential reference for individuals and financial institutions actually selecting optimal portfolios.
Long out of print and unavailable to numerous recent entrants to both financial theory and financial practice, this new edition leaves the existing text as it stands but adds substantial new material including a new bibliography and a fascinating biographical piece on the birth of the field of finance.
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Most Helpful Customer Reviews
32 of 35 people found the following review helpful:
4.0 out of 5 stars
The original classic,
By A Customer
This review is from: Portfolio Selection: Efficient Diversification of Investments (Hardcover)
This is a reprint of the text that first considered risk along with return in portfolio management! Nobel-prize winner Harry Markowitz explains the theory upon which modern portfolio theory is based in minimal mathematical terms. Of course there has been much subsequent academic research in portfolio theory (much of which is contained in an included bibliography up to 1970), but this book is an outstanding starting point for anyone interested in the efficient management of financial portfolios
23 of 26 people found the following review helpful:
5.0 out of 5 stars
A brilliant intellectual feat,
By
This review is from: Portfolio Selection: Efficient Diversification of Investments (Hardcover)
While Markowitz is a name well-known in economics (joint winner of the Nobel Proze in 1990) and the investment industry, it is known hardly at all among the public. Perhaps this is the inevitable fate of a man well ahead of his time: Markowitz's work on the relationship of risk and return is truly one of the staggering intellectual achievements of modern economics, and has a great practical impact on people's economic welfare. This volume recapitulates his argument that risk is what drives return, rather than being (as was thought by earlier generations of money managers) merely an unfortunate by-product of the search for higher returns, that the portfolio dominates its constituent assets, and that the way to minimise risk for a given level of expected return is to minimise the covariance of returns of the assets within that portfolio using a quadratic programming algorithm. This is brilliant, seminal stuff, written with a liveliness usually lacking in economic texts.
3 of 3 people found the following review helpful:
5.0 out of 5 stars
What a book!,
By Franz Woyzeck "FW" (Frankfurt) - See all my reviews
This review is from: Portfolio Selection: Efficient Diversification of Investments (Cowles Foundation Monograph: No. 16) (Paperback)
Almost 50 years after its first printing there is not a single word that should be changed. As some of Markowitz' important original insights have been ignored or overlooked by many of his successors (e.g. the relationship between mean-variance efficiency and long-term growth or the irrelevance of the return distribution for M/V optimisation), this is still a must-read for anybody truly interested in portfolio theory.
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Inside This Book
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First Sentence:
this monograph is concerned with the analysis of portfolios containing large numbers of securities. Read the first page Key Phrases - Statistically Improbable Phrases (SIPs): (learn more)
expected utility maxim, legitimate portfolios, more average return, first critical line, critical line method, new critical line, points representing portfolios, critical line intersects, expected absolute deviation, average past return, corner portfolios, expected utility rule, distinct covariances, associated utility function, less standard deviation, available probability distributions, probability beliefs, true utility function, binary change, same average return, conditional expected utility, ith security, efficient portfolios, greater expected return, average covariance Key Phrases - Capitalized Phrases (CAPs): (learn more)
Years Figure, Monte Carlo, Poor Index, Sharon Steel, United States Steel, Natures of the World, Axiom Ill, Amount Covar New!
Books on Related Topics | Concordance | Text Stats Browse Sample Pages:
Front Cover | Table of Contents | First Pages | Index | Back Cover | Surprise Me!
this monograph is concerned with the analysis of portfolios containing large numbers of securities. Read the first page Key Phrases - Statistically Improbable Phrases (SIPs): (learn more)
expected utility maxim, legitimate portfolios, more average return, first critical line, critical line method, new critical line, points representing portfolios, critical line intersects, expected absolute deviation, average past return, corner portfolios, expected utility rule, distinct covariances, associated utility function, less standard deviation, available probability distributions, probability beliefs, true utility function, binary change, same average return, conditional expected utility, ith security, efficient portfolios, greater expected return, average covariance Key Phrases - Capitalized Phrases (CAPs): (learn more)
Years Figure, Monte Carlo, Poor Index, Sharon Steel, United States Steel, Natures of the World, Axiom Ill, Amount Covar New!
Books on Related Topics | Concordance | Text Stats Browse Sample Pages:
Front Cover | Table of Contents | First Pages | Index | Back Cover | Surprise Me!
Citations (learn more)
This book cites 22
books:
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100
books
cite this book:
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- Mean-Variance Analysis in Portfolio Choice and Capital Markets by Harry M. Markowitz on 4 pages
- Security Analysis: The Classic 1951 Edition by Benjamin Graham on page 28, Back Matter (1), and Back Matter (2)
- Management Science by Laurence Moore in Back Matter (1), and Back Matter (2)
- Risk & Uncertainty (International Economic Associa) by Karl Borch in Front Matter, and Back Matter
- Portfolio Theory and Capital Markets: The Original Edition by William F. Sharpe in Back Matter (1), and Back Matter (2)
See all 22 books this book cites
- Nobel Lectures in Economic Sciences, Vol 2 (1981-1990): The Sveriges Riksbank (Bank of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel ... Including Presentation Speeches and Laureate) by Karl-Goran Maler on 4 pages
- The Handbook of Managed Futures and Hedge Funds: Performance, Evaluation, and Analysis by Carl Peters on page 14, page 135, and page 328
- Worldwide Asset and Liability Modeling (Publications of the Newton Institute) by William T. Ziemba on page 77, page 203, and page 605
- Principles of Financial Economics by Stephen F. LeRoy on page 193, and page 203
- Derivatives, Regulation and Banking (Advances in Finance, Investment and Banking) by B. Schachter on page 284, and page 312
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