Harry Markowitz is an economist at the Rady School of Management at the University of California, San Diego. He is best known for his pioneering work in Modern Portfolio Theory, studying the effects of asset risk, correlation and diversification on expected investment portfolio returns. Dr. Markowitz is also the recipient of the 1989 John von Neumann Theory Prize. In 1952, Harry Markowitz developed the simple, but profound notion that investors must consider not only return, but the risk…

This book and Exercises evaluate Modern Portfolio Theory (Markowitz, CAPM, MM and APT) for future study. From the original purpose of MPT through to asset investment by management, we learn why anybody today with the software and a reasonable financial education can model portfolios. However, one lesson from the 2007 meltdown is that computer driven models are so complex that hardly anybody understands what is going on.

In order to compare investment options, Markowitz developed a system to describe each investment or each asset class with math, using unsystematic risk statistics. Then he further applied that to the portfolios that contain the investment options. He looked at the expected rate-of-return and the expected volatility for each investment. He named his risk-reward equation The Efficient Frontier.