A Model Challenging the 21st Century Financial Markets

7 Pages Posted: 12 Jan 2011

See all articles by Sebastian Chirimbu

Sebastian Chirimbu

Spiru Haret University - Department of Specialized Languages, Centre for Research and European Studies AEPEEC

Adina Barbu-Chirimbu

Spiru Haret University - Department of Specialized Languages

Date Written: January 11, 2011

Abstract

Developed in the 1950s and 1960s, the core concept of the Markowitz model - the homogenous expectations assumption - is important to capital asset pricing models. The Markowitz Model uses the statistical variance of a stock's price as the measure of its risk and its expected return as the measure of its long-term prospects. It was created in 1952 by Harry Markowitz and is considered to be an optimization model for balancing the expected return and risk of a portfolio. Although more than half a century old, this model is both fresh and applicable in the contemporary financial environment.

Keywords: Capital asset pricing model, efficient frontier, expected return, dispersion of expected return

JEL Classification: G11

Suggested Citation

Chirimbu, Sebastian and Barbu-Chirimbu, Adina, A Model Challenging the 21st Century Financial Markets (January 11, 2011). Available at SSRN: https://ssrn.com/abstract=1738536 or http://dx.doi.org/10.2139/ssrn.1738536

Sebastian Chirimbu (Contact Author)

Spiru Haret University - Department of Specialized Languages, Centre for Research and European Studies AEPEEC ( email )

Bucharest
Sector 6
Bucharest, 030045
Romania

Adina Barbu-Chirimbu

Spiru Haret University - Department of Specialized Languages ( email )

Ion Ghica Street nr 13 sector 3
Sector 6
Bucharest, 030045
Romania

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