Blog: Recognition for Dr. Harry Markowitz - the Founder of Quantitative Finance.

Last year was the 70^th anniversary of “Portfolio Selection” being published in the Financial Analysts Journal.  That paper is the bedrock upon which quantitative finance is built.  The anniversary passed with little fanfare.  So I guess I shouldn’t be surprised that the August 25^th passing of that paper’s author, Nobel Laureate Dr. Harry Markowitz, had so little acknowledgement.   Yet I am disappointed that our field cannot acknowledge how prescient Dr. Markowitz’s work was.  It’s like aerospace engineers saying that the Wright brothers plane is irrelevant because it could only fly over short distances.  Instead today's engineers acknowledge that the Wright brothers pioneered many principles which are still in the DNA of today’s aircraft. Wing design continues using their basic ideas in some form.

But in finance, it seems that because Markowitz was not concerned with predicting markets, he just isn’t that interesting.  True, Markowitz was not interested in predicting market returns.  He was interested in was diversification and how to quantify the concept. He was interested in methodologies to construct portfolios that made sense and took both expected returns and risk into account.  His insight was to use statistics, which was unknown in market analysis at that time. I can say from experience that as late as the 1980s, most portfolios were still balanced according to intuitive judgement.  Little statistical analysis was used. In general, it was a bunch of guys (yes, it was always guys), making phone calls, and reading the Wall Street Journal while smoking cigars.