Theories Of Harry Markowitz Portfolio Allocation Theory

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HAW Hamburg Faculty of Business and Social Science Department of Business Term paper Markowitz portfolio allocation theory First name, family name Date and place of birth Matriculation number Maria Titova 10.08.1992, Moscow 2227909 Telephone, e-mail Date of submission: +49 152 0218 1097 5rd December 2014 maria.titova@haw-hamburg.de Lecturer: Prof. Dr. Decker Course: Corporate Finance Name of degree program: International Business (M.Sc.) - II - I Abstract The idea of diversification is rather old. The axiom “don’t put all your eggs in one basket” definitely precedes economic theory. However, the theory, pointed to the power of diversification was first developed by Markowitz in 1952 and now is known as Markowitz portfolio allocation theory.…show more content…
Error! Bookmark not defined. V List of abbreviations CAPM Capital Asset Pricing Model - 1 - 1 Introduction 1.1 Research problem Harry Markowitz is one of the founders of the theory of finance, the fastest growing economic sciences. This lays the foundation for the applied financial management in a company, using the tools and methods of investigation with a help of which any company can analyze its financial position, to assess the value of its capital and its structure, to select the best investment project and to manage it or to decide how and how many shares or bonds to issue. Markowitz's approach to the problem of portfolio selection suggests that the investor tries to solve two problems: to maximize the expected return at a given level of risk or minimize uncertainty (risk) at a given level of expected return. Therefore, the aim of this course work - review the Markowitz portfolio allocation theory as a way of creating the optimal and efficient investment portfolio and highlight its importance in modern world. This paper tries to answer two fundamental questions: first, what is the main idea behind Markowitz allocation theory, and the second, how valid is Markowitz theory
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