Markowitz, Harry

In his seminal paper published in 1952, Harry Markowitz formulated the framework for portfolio optimization, which helps an investor to maximize his utility depending on expected return and expected risk of the portfolio." The objective is to identify, on the basis of return and variance/covariance estimators, those portfolio weights that maximize the utility of the investor. The solutions for different investors depend on their individual risk preferences. In most cases, an investor achieves maximum utility when the return of his portfolio is maximal ... 

Harry M. Markowitz Portfolio Selection, Journal of Finance 1 (1952), pp. 77-91. 

The Theory and Practice of Investment Management edited by Frank J. Fabozzi and Harry M. Markowitz... 

The rationale behind the minimum-variance portfolio was introduced in the 1952 when Harry Markowitz presented the Modem Portfolio Theory. It suggests that rational investor should choose the optimal portfolio which will be developed from the trade-off between risk and expected return. The idea is to maximize the expected return for given level of risk (where risk is denoted as standard deviation of the portfolio). 

The first large study was conducted in Rumania in 1963, where 168 PVC workers had been observed over 4 years (Suciu et al. 1963). The symptoms included pruritus of the arms and face, and scleroderma-like lesions which mostly disappeared after removal from the workplace. Later on, the disease was described in detail and labeled as occupational acro-osteolysis (OAOL) in England, France, and the USA (Cordier et al. 1966 Harris and Adams 1967 Wilson et al. 1967 Dinman et al. 1971 Markowitz et al. 1972). The disease is characterized by Raynaud s phenomenon, papular-fibrotic skin lesions on the wrist and dorsa of the hands, and osteolysis in the middle of the distal phalanges (bullet holes), mainly of the first three fingers, which became shortened and shapeless. OAOL occurred only in those workers who had been exposed to the VC monomer and was most common in reactor cleaners (Lelbach and Marsteller 1981). 

Methods of statistical sampling and the Law of Large Numbers were invented in 1703 by Jacob Bernoulli. Abraham de Moivre discovered the concept and structure of normal distribution in 1730. Around the same time Daniel Bemoulh defined the systematic process by which people make choices and decisions. Thomas Bayes, in about 1750, discovered a way to make better-informed decisions by mathematically blending new into old informatiom In 1875, Francis Gallon discovered regression to the mean, and Harry Markowitz demonstrated mathematically why diversification is desirable in 1952. 

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