Harry Markowitz pioneered “modern portfolio theory,” which examines how diversification contributes to a portfolio’s ratio of risk and reward. His work as an economist earned him a Nobel Prize and numerous other honors.
- Died: June 22, 2023 (Who else died on June 22?)
- Details of death: Died in San Diego of pneumonia and sepsis at the age of 95.
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Harry Markowitz’s legacy
For many economists, most modern investment theory can be traced back to Markowitz’s work. Studying at the University of Chicago in the 1940s and 1950s, where he eventually earned his PhD in Economics, Markowitz began to flesh out the theory that would cement his reputation as an important figure in the field, suggesting that the strengths of individual stocks and bonds don’t matter as much as how they can work together to create a stronger overall result.
Markowitz initially received pushback for his ideas. At the time, the accepted practice was to simply choose the stocks that had the best chance of success. Markowitz instead experimented with the odds of risk and reward in a diversified portfolio, exploring how individual parts of a portfolio affect one another. His mathematical breakthroughs in this regard would go on to inform most aspects of modern money management.
Markowitz’s work earned him a number of prestigious awards, most notably the John von Neumann Theory Prize in 1989 and the Nobel Memorial Prize in Economic Sciences in 1990. Pensions & Investments magazine named him Man of the Century in 1999. His work in mathematics also had a major impact on computer programming, primarily due to his “sparse matrix” techniques, and his design work on SIMSCRIPT influenced workplace simulations.
Notable quote
“Most people at the time assumed the way to maximize the expected value of the portfolio is by putting all your money into whatever stock has maximum expected value. That is not right. Everybody knows you are not supposed to put all your eggs in one basket.”—from an interview with SkyView Investment Advisors
Tributes to Harry Markowitz
Full obituary: The New York Times
