Summary of a reading Outline Example | Topics and Well Written Essays - 500 words

Summary of a reading - Outline Examplee1930s, the scars of demesne War II, and presence of unscrupulous players in the market coupled with legal restrictions kept the general open away from the stock market in the 1950s. A.D.Roys paper titled Safety First and the retentiveness of Assets published three months after Markowitzs paper appeared in the Journal of Finance, discussed the same lines of arguments, but did not evoke any response.After earning his chthoniangraduate degree in economics, Markowitz continued his graduate work spell serving as a Research Associate at the Cowles Commission. He chose stock market as the subject of his doctoral dissertation in consultation with Jacob Marschak (director of Cowles Commission) and Marshall Ketchum (Dean of the Graduate School of Business). The Theory of coronation Value by John Burr Williams fascinated him, but it struck him that people should consider chance as well as return while making investment decisions. So he utilise Tjal ling Koopmans (Prof. of Economics at Chicago University) linear programming technique for solving problems of resource allocation under constraints, to analyze the choices facing an investor who must decide between seeking lavishly returns and attempting to hold down chance at the same time.Diversification protects the investor from losing everything in one swoop. At the same time it reduces the opportunity of earning high returns by concentrating investment in one stock which appears to be the best. Markowitz followed the idea of the tension between luck and return and between diversification and concentration down two separate tracks. The first track, the subject of his 1952 article, tells the investor how to feed the trade off between risk and reward in selecting a portfolio, by applying Koopmans linear programming. The twinkling track tells how each investor should go about selecting the single portfolio that most closely conforms to the investors goals. This aspect is trea t at length in Markowitzs book, Portfolio