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Bridge over ocean
1 September 1966 Financial Analysts Journal Volume 22, Issue 5

Mathematical Analysis of Portfolio Selection: Principles and Application

  1. William J. Baumol

This paper describes the workings of the Markowitz portfolio selection technique. It indicates how it can help the financial analyst and discusses the limitation of the method.

Nearly 15 years have elapsed since Professor Markowitz’s analysis of portfolio selection first appeared in print. Since then this work has been extremely influential in shaping basic research in the general area, but its application to practical portfolio selection problems has thus far been rather limited. The writer undertakes to explain the logic of the Markowitz approach, to indicate why, despite the availability of so many able and experienced investment analysts, such an approach to the subject has a useful role to play, and to account for the relatively modest level of utilization of the Markowitz method of analysis.

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