Publication Year



Markowitz model, investments, investment counseling, portfolio management, investor behavior


Business | Economics | Portfolio and Security Analysis


Investment counseling and decision making criteria have undergone drastic changes the past two decades--largely due to Harry M. Markowitz. Radical theories of portfolio management have been developed by Markowitz, gaining increased acceptance since their introduction in 1952. Prior to this time rather naive concepts persisted on how to manage a firm's investment portfolio. The investment sector of the financial world was highly dependent upon chartists and technical analysts for input on how to manage portfolios. The dominant philosophy of portfolio management prior to 1952 can be summarized as follows. Emphasis was placed upon the evaluation of individual securities. How securities would perform when combined with one another was not considered. An investment manager looked only at an individual security's potential and past returns and virtually neglected any factor of risk the firm might be exposed to. Evaluation was on securities individually, not on securities together in a portfolio.