Harry M. Markowitz - Portfolio Theory and the Financial Crisis

Seminar Paper , 2009 , 10 Pages , Grade: 1,0

Didactics - Business economics, Economic Pedagogy

This seminar paper explains Markowitz's Portfolio Theory in a consolidated and understandable way.
The principles of the Portfolio Theory are connected to the Financial Crisis that started as a bursting real-estate bubble in 2006. In this connection, it is shown that on the one hand the basic principles of Markowitz apply and might have helped to lower the extent of the crisis. On the other hand, the Risk-Return-Paradoxon which supported the evolution of the crisis is discussed.

Inhaltsverzeichnis (Table of Contents)

• Introductory Biography of Harry M. Markowitz
• The Portfolio Theory
  • Risk and Return
  • Diversification
• Relation to the Financial Crisis
• Literature

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This seminar paper aims to provide an overview of Harry M. Markowitz's portfolio theory and its relevance in the context of the financial crisis. The paper explores the key concepts of risk and return in portfolio diversification, as well as the applicability of Markowitz's theory to real-world financial scenarios.

• The inseparability of risk and return in investment decisions
• The concept of diversification and its impact on portfolio risk
• The use of expected value and standard deviation to quantify risk and return
• The relationship between Markowitz's theory and the financial crisis
• The historical and contemporary significance of portfolio theory

Zusammenfassung der Kapitel (Chapter Summaries)

Introductory Biography of Harry M. Markowitz

This chapter provides a biographical overview of Harry M. Markowitz, highlighting his early influences, academic achievements, and contributions to the field of finance. It outlines his formative years, his academic journey, and his involvement in developing the first simulation programming language, SIMSCRIPT.

The Portfolio Theory

Risk and Return

This section explores the fundamental concept of risk and return in portfolio theory. It examines how these two factors are inextricably linked and how Markowitz's theory seeks to optimize portfolio performance by considering both.

Diversification

The chapter delves into the concept of diversification as a key strategy in portfolio management. It explains how diversifying investments across different assets can mitigate risk and enhance potential returns.

Relation to the Financial Crisis

This section examines the applicability of Markowitz's portfolio theory in the context of the financial crisis. It explores the theory's strengths and limitations in dealing with complex and unpredictable financial events.

Schlüsselwörter (Keywords)

The key terms and concepts covered in this seminar paper include: portfolio theory, risk, return, diversification, expected value, standard deviation, volatility, financial crisis, and investment decisions. These topics are central to understanding the core principles and applications of Harry M. Markowitz's seminal work.

• College: Johannes Gutenberg University Mainz (Fachbereich 03: Rechts- und Wirtschaftswissenschaften, Lst für Wirtschaftspädagogik)
• Course: Seminar: Topical Aspects of the Intertwined International Economy
• Grade: 1,0
• Author: Dipl. Kfm. Peter Weyel (Author)
• Publication Year: 2009
• Pages: 10
• Catalog Number: V170556
• ISBN (eBook): 9783640895267
• ISBN (Book): 9783640895908
• Language: English
• Tags: Markowitz, Portfolio Theory, Risk Return Paradoxon, Financial Crisis, Finanzkrise, Portfoliotheorie