Modern Portfolio Theory and Behavioral Finance - JWM
By GREGORY CURTIS
There is nothing quite like a Nobel Prize to focus the investing public’s attention. Harry Markowitz developed the concept of mean variance optimization in the early 1950s,2 but it wasn’t until he was awarded the Nobel Prize in Economics in 1990 that most investors began to develop a keen interest in efficient frontiers. In 2002, Daniel Kahneman won the Nobel for his work in behavioral finance, and suddenly investors everywhere are looking at behavioral finance techniques to improve their riskadjusted performance. In fact, Kahneman (and his colleague, Amos Tversky)3 did their key work back in the 1970s.