summarize 3 famous economists’ life story

summarize 3 famous economists’ life story

Harry Markowitz was born in 1927 in Chicago. He attended the University

of Chicago and majored in economics. He found the subject appealing enough

to go on to graduate school and eventually arrived at the thesis stage. While

waiting to see Jacob Marschak he struck up a conversation with a stockbroker

who suggested that he might write a thesis about the stock market. Markowitz

was excited by this idea and started to read in the area.

One of his first books was The Theory of Investment Value by John Burr

Williams, (1938). Williams argued that the value of a stock should be the

present value of its dividends-which was then a novel theory. Markowitz

quickly recognized the problem with this theory: future dividends are not

known for certain-they are random variables. This observation led Markowitz

to make the natural extension of the Williams’ theory: the value of a stock

should be the expected present value of its dividend stream.

But if an investor wants to maximize the expected value of portfolio of

stocks he owns, then it is obvious that he should buy only one stock-the one

that has the highest expected return. To Markowitz, this was patently unrealis-

tic. It was clear to him that investors must care not only about the expected

return of their wealth, but also about the risk. He was then naturally led to

examine the problem of finding the portfolio with the maximum expected

return for a given level of risk