Harry Markowitz, the father of modern portfolio theory, said people tend to hold not just one but a portfolio of investments.
Nobel prize-winning economist
Harry Markowitz, credited with modern portfolio theory, described diversification as "the only free lunch in finance".
These tools are slightly improved versions of pioneering work in the 1950s and 1960s by
Harry Markowitz (the efficient frontier), William Sharpe and others (the capital asset pricing model), and Myron Gordon (the dividend discount model for valuing a firm).
In the portfolio model, based on
Harry Markowitz's portfolio theory, weapon systems acquisition is viewed in terms of the expected return and variance.
Later,
Harry Markowitz and Bill Sharpe proved that a diverse portfolio of stocks and bonds could be just as safe as all bonds and return a far greater profit.
Financial advisory firm Personal Capital has named Nobel Memorial prize winner
Harry Markowitz and behavioral economist Shlomo Benartzi to its board of academic advisors, the company said.
Many institutions are looking for a new approach and are adopting risk parity or de-risking strategies for their SAAs, but many of these approaches, by ignoring the wisdom of Keynes or Samuelson, run the risk of making the SAA a "Simply Awful Allocation." The root of the trouble is the bad application of the theories of another set of brilliant economists (
Harry Markowitz, Bill Sharpe, James Tobin), who developed the tools of modern day portfolio management.