Markowitz looked at how the historic prices of a group of stocks behaved in relation to each other. He then attempted to plot the relationship between risk and reward on a chart. His goal was to create an efficient portfolio, one that would help investors maximize their returns with the least amount of risk they were willing to stomach. Four decades later, in 1990, Markowitz won the Nobel Prize in economics.
Last week, Harry Markowitz died at the age of 95. He was a Nobel prize winner and the brains behind a famous economic (mathematical?) theory that explains how to diversify one’s investment portfolio.
So in today's episode for 28th June 2023, we thought we’d take a look back at his famous theory and see whether it still holds good today.