Harry Markowitz 101: Father of Modern Portfolio Management
Harry Markowitz 101: Who is an American Economist? in our article of Zatrun.com, we will cover in detail everything you need to know about Harry Markowitz, the American economist who our readers are curious about.
Who is Harry Markowitz?
Harry Max Markowitz was an American economist known for his ground-breaking work on modern financial portfolio management. He is especially known for his influential research on the impact of asset risk, correlation, and portfolio diversification on investment returns.
Markowitz was born on August 24, 1927 in Chicago, Illinois. During his high school years, he developed an early interest in physics and philosophy, focusing especially on the contributions of the English philosopher David Hume. He received his bachelor’s degree in these subjects from the University of Chicago before switching to the economics department for his graduate studies. There he worked with important economists such as Milton Friedman, Tjalling Koopmans, Jacob Marschak and Leonard Savage.
As a student, he was invited to join the research center of the Cowles Commission by Harry Markowitz, a highly prestigious institution at that time. For his doctoral thesis, he chose to apply mathematical principles to stock market research.
Although the prevailing stock price analysis at that time was based on the theory of present value developed by John Burr Williams, Markowitz acknowledged that this approach did not consider the risk and uncertainty in portfolio finance. He developed a new theory on portfolio optimization under uncertainty and published his findings in a famous academic journal of economics and finance called Journal of Finance in 1952.
His Career Life
Markowitz joined the Rand Corporation research centre in 1952, where he collaborated with George Dantzig, the developer of the one-way algorithm for linear programming. With Dantzig’s support, Markowitz worked on optimization techniques by developing the critical line algorithm for determining optimal mean-variance portfolios, later known as the Markowitz bound.
He received his Ph.D. from the University of Chicago with a dissertation on financial portfolio theory in 1955. The topic was so new that during Markowitz’s dissertation defence, leading committee member Milton Friedman expressed uncertainty about whether the topic belonged to economics or mathematics.
Markowitz worked at the Cowles Commission research centre from 1955 to 1956, moving to Yale University for a year. During this time, his theory of the Markowitz boundary was published as an article in 1956 and as an expanded book in 1959.
During Markowitz’s time at RAND, he made a name for using SIMSCRIPT, the first simulation programming language he developed, to provide technical support and training. When Markowitz received the Nobel Prize in 1990, he was a professor of finance at Baruch College of the City University of New York.
Harry Markowitz has worked directly and as a consultant for many private sector companies throughout his career. One of these companies, California Analysis Center Inc (CACI), was recognized for Markowitz’s use of SIMSCRIPT, the first simulation programming language he developed while at RAND, and for providing technical support and training.
