Portfolio Selection. Harry Markowitz (1952) Modern Portfolio Theory
Portfolio Selection, written by Harry Markowitz in 1952 started what is today known as Modern Portfolio Theory.
Portfolio Selection Harry Markowitz.pdf
Portfolio Selection. Harry Markowitz. The Journal of Finance, Vol. 7, No. 1. (Mar., 1952), pp. 77-91.
ABSTRACT
THE PROCESS OF SELECTING a portfolio may be divided into two stages. The first stage starts with observation and experience and ends with beliefs about the future performances of available securities. The second stage starts with the relevant beliefs about future performances
and ends with the choice of portfolio. This paper is concerned with the second stage. We first consider the rule that the investor does (or should)maximize discounted expected, or anticipated, returns. This rule is rejected both as a hypothesis to explain, and as a maximum to guide investment behavior. We next consider the rule that the investor does (or should) consider expected return a desirable thing and variance of return an undesirable thing. This rule has many sound points, both as a maxim for, and hypothesis about, investment behavior. We illustrate geometrically relations between beliefs and choice of portfolio according to the "expected returns-variance of returns" rule.
