Risk-Return Analysis Volume 3

The man who created investing as we know it provides critical insights, knowledge, and tools for generating steady profits in today’s economy. When Harry Markowitz introduced the concept of examining and purchasing a range of diverse stocks—in essence, the practice of creating a portfolio—he transformed the world of investing. The idea was novel, even radical, when he presented it in 1952 for his dissertation. Today, it’s second-nature to the majority of investors worldwide.  Now, the legendary economist returns with the third volume of his groundbreaking four-volume Risk-Return Analysis series, where he corrects common misperceptions about Modern Portfolio Theory (MPT) and provides critical insight into the practice of MPT over the last 60 years. He guides you through process of making rational decisions in the face of uncertainty—making this a critical guide to investing in today’s economy. From the Laffer Curve to RDM Reasoning to Finite Ordinal Arithmetic to the ideas and concepts of some of history’s most influential thinkers, Markowitz provides a wealth and depth of financial knowledge, wisdom, and insights you would be hard pressed to find elsewhere.  This deep dive into the theories and practices of the investing legend is what you need to master strategic portfolio management designed to generate profits in good times and bad.  

Table of Contents:
 Preface  The Rational Decision Maker Words of Wisdom John von Neumann  Acknowledgments 13. Predecessors  Introduction  René Descartes  There Is No “Is,” Only “Was” and “Will Be”  Working Hypotheses  RDM Reasoning  David Hume  Eudaimonia  Financial Economic Discoveries  Economic Analyses That Have Stood the Test of Time  Constructive Skepticism  Isaac Newton, Philosopher  Fields Other Than Physics  Karl Popper  Mysticism  Caveats  Charles Peirce  Immanuel Kant  What an RDM Can Know A Priori   14. Deduction First Principles  Introduction  The Great Debate  One More Reason for Studying Cantor’s Set Theory  “Very Few Understood It”  Finite Cardinal Arithmetic  Relative Sizes of Finite Sets  Finite Ordinal Arithmetic  Standard Ordered Sets (SOSs)  Finite Cardinal and Ordinal Numbers  Cantor (101)  Theorem  Proof  Corollary  Proof  Transfinite Cardinal Numbers  The Continuum Hypothesis  Transfinite Cardinal Arithmetic  Lemma  Transfinite Ordinal Numbers Examples of Well-Ordered and Not Well-Ordered Sets Transfinite Ordinal Arithmetic Extended SOSs Lemma Proof The Paradoxes (a.k.a. Antimonies)  Three Directions  From Aristotle to Hume to Hilbert  British Empiricism versus Continental Rationalism  Who Created What?  Cantor Reconsidered  Brouwer’s Objections  Axiomatic Set Theory  Peano’s Axioms (PAs)  Hilbert’s Programs  Whitehead and Russell  Zermelo’s Axioms  The “Axiom of Choice”  The Trichotomy Equivalent to the Axiom of Choice  Kurt Gödel (1906–1978)  Thoralf Skolem (1887–1863)  15. Logic is Programming is Logic  Introduction  Terminology  Number Systems and the EAS Structures Built on Them  Deductive Systems as Programming Languages  A Variety of Deductive DSSs  Alternative Rules of Inference  “Ladders” and “Fire Escapes”  Organon 2000: From Ancient Greek to “Symbolic Logic”  So, What’s New?  Immediate Consequences  Two Types of Set Ownership  Modeling Modeling  EAS-E Deduction: Status  16. The Infinite and The Infinitesimal  Points and Lines  Fields  Constructing the Infinitesimals  Infinite-Dimensional Utility Analysis  The Algebraic Structure Called “A Field”  17. Induction Theory  Introduction  The Story Thus Far  Concepts  Basic Relationships  Examples  “Objective” Probability  The Formal M59 Model  Initial Consequences  Bayes’s Rule  A Bayesian View of MVA  Judgment, Approximation and Axiom III  (1) A Philosophical Difference between S54 and M59  Examples of Clearly “Objective” Probabilities”  Propositions about Propositions  A Problem with Axiom II  Are the πj  Probabilities the Scaling of the πj ? The πj “Mix on a Par” with Objective Probabilities  18. Induction Practice  Introduction  R. A. Fisher and Neyman-Pearson Hypothesis Tests  The Likelihood Principle  Andrei Kolmogorov  A Model of Models  The R.A. Fisher Argument  Bayesian Conjugate Prior Procedures  19. Eudaimonia  Review  Eudaimonia for the Masses  Notes  References  Index 

About the Author :
Harry M. Markowitz is president of Harry Markowitz Co. in San Diego. In 1990, he was jointly awarded the Nobel Prize for economics with Merton Miller and William Sharpe.