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Old 09-12-2006, 02:43 PM   #1
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Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
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Pretty nice summary of MPT and financial economics that Markowitz slapped together over 50 years ago. It works!

The world wasn't quite ready for Markowitz, though. Fame and fortune were a long time coming. First, financial economics had barely established itself as an independent study. Moreover, it took a lot of computer power to run a complete optimization model--a lot more than was available at the time he first presented his ideas. William Sharpe, a student of Markowitz's and the namesake of the Sharpe ratio, simplified the math considerably some years later. But optimization still wasn't anything that could be done on the back of an envelope.

Not until the crash of 1987 did risk get Wall Street's full attention. By then, computing power had caught up to Markowitz's genius, and MPT became a widely accepted and widely used technique. In 1990, 38 years after Markowitz' dissertation was published, the father of modern portfolio theory shared the Nobel Prize for Economics.
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