On June 22, 2023, Nobel Prize winner Harry Markowitz, PhD father of modern portfolio theory died at age 95. In 1952, Markowitz published a paper titled “Portfolio Selection” in the Journal of Finance, which laid the foundation for what is still referred to as “modern portfolio theory” or MPT. His research emphasized the importance of diversification and the relationship between risk and return in investment portfolios. Markowitz introduced the concept of the “efficient frontier,” which represents a set of optimal portfolios that offer the highest expected return for a given level of risk or the lowest risk for a given expected return. Each portfolio on the efficient frontier represents a different optimal proportion of each investment alternative. His research emphasized the benefits of diversification, showing how combining assets with low or negative correlations can reduce overall portfolio risk.

The development of MPT was part of Harry’s dissertation at the University of Chicago. The story goes that when he was defending his dissertation in 1954, Milton Friedman who was chair of his dissertation committee told Harry that he wasn’t sure his dissertation was acceptable as an economics dissertation since it was “just math.” But fortunately, Milton was likely joking, and Markowitz did pass his dissertation and his work on MPT ultimately resulted in a Nobel Prize in Economic Sciences in 1990. Dr Friedman attended the Nobel Prize ceremony, which he had received in 1976, and at the end of Harry’s acceptance speech he asked Milton if his dissertation was now acceptable economics.