Risk-Return Analysis: Volume 2

Full Name
Risk-Return Analysis: The Theory and Practice of Rational Investing (Volume 2)

Risk Return Analysis: Volume 2 picks up where the first volume left off, with Markowitz’s personal reflections and current strategies. It focuses on the relationship between single-period choices and longer-run goals. Written with both the academic and the practitioner in mind, this richly illustrated volume provides investors, economists, and financial advisors with a refined look at MPT, highlighting the rational decision-making and probability beliefs that are essential to creating and maintaining a successful portfolio today.

Table of Contents

Cover Page

Title Page

Copyright Page

Addendum to Volume I




Chapter 6. The Portfolio Selection Context

  • Introduction

  • Temporal Structure and Today’s Choice

  • Stakeholders Versus “the Investor

  • Investor Roles

  • Diversification Needs and Opportunities: Recognized and Unrecognized

  • Agenda: Analysis, Judgment, and Decision Support Systems

Chapter 7. Modeling Dynamic Systems

  • Introduction

  • Definitions

  • The EAS-E Worldview

  • The Modeling Process

  • An EAS Example

  • Graphical Depiction of Attributes

  • Graphical Depiction of Sets

  • Further Specifications

  • Describing Time

  • Simultaneity

  • Endogenous Events Versus Endogenous Phenomena

  • JLMSim Events

  • Simplicity, Complexity, Reality

  • The SIMSCRIPT Advantage

  • GuidedChoice and the Game of Life

  • The GC DSS Database

  • Simulator Versus DSS Modeling

  • Issues and Alternatives


  • The Process View

  • Subsidiary Entities

  • SIMSCRIPT III Features

  • Continued in Chapter 12

Chapter 8. Game Theory and Dynamic Programming

  • Introduction

  • PRWSim (a Possible Real-World Simulator)

  • Concepts from Game Theory

  • Non-“Theory of Games” Games

  • Randomized Strategies

  • The Utility of a Many-Period Game

  • Dynamic Programming

  • Solving Tic-Tac-Toe

  • Conditional Expected Value: An Example

  • Generalization

  • Partitions, Information, and DP Choice: An Example

  • Generalization: Two Types of Games

  • The Curse of Dimensionality

  • Factorization, Simplification, Exploration, and Approximation

Chapter 9. The Mossin-Samuelson Model

  • Introduction

  • The MS Model and Its Solution

  • Markowitz Versus Samuelson: Background

  • Glide-Path Strategies and Their Rationales

  • Relative Risk Aversion

  • The GuidedSavings Utility Function

  • The Well-Funded Case

  • A Game-of-Life Utility Function

Chapter 10. Portfolio Selection as a Social Choice

  • Introduction

  • Arrow’s Paradox

  • The Goodman and Markowitz (1952) (GM) Theorems

  • Social Ordering for RDMs

  • Hildreth’s Proposal

  • Markowitz and Blay (MB) Axioms

  • Arithmetic Versus Geometric Mean Utility

  • Symmetry Revisited

  • Rescaling Ploys

  • Voting Blocks

  • The Luce, Raiffa, and Nash (LRN) Choice Rule

  • Nash Symmetry

  • A Proposal

  • Liberté, Égalité, Prospérité

Chapter 11. Judgment and Approximation

  • Introduction

  • EU Maximization: Exact, Approximate; Explicit, Implicit

  • The Household as Investor

  • The Markowitz and van Dijk Methodology

  • The Blay-Markowitz NPV Analysis

  • The TCPA Process

  • Estimating PV Means, Variances, and Covariances

  • Displaying the Efficient Frontier

  • Resampled AC/LOC Portfolios

  • TCPA 1.0 Assumptions

  • Beyond Markowitz

  • “Buckets”: A Brief Literature Review

  • The “Answer Game”

  • First the Question, Then the Answer

Chapter 12. The Future

  • Introduction


  • Proposals

  • Current Practice

  • Agenda

  • Level 6

  • SIMSCRIPT Facilities

  • IBM EAS-E Features

  • Like the Phoenix

  • Level 7

  • SIMSCRIPT M Enhancements

  • Computing: Past, Present, and Future

  • Von Neumann (1958): The Computer and the Brain

  • The Computer and the Brain, Revisited

  • Emulation, Not Replication

  • Event Invocation of a Third Kind

  • Processes That Process Processes

  • Easily Parallelized Processes (EPPs)

  • Local Resource Groups

  • Micro Versus Macro Parallelization

  • Epilogue