From Bogleheads
Revision as of 16:11, 26 July 2019 by Nisiprius (talk | contribs) (The cited source explicitly calls this "Markowitz diversification," not just "diversification.")
Jump to navigation Jump to search

Within the framework of modern portfolio theory (MPT), the term Markowitz diversification can mean

combining securities with less-than-perfect positive correlation in order to reduce risk in the portfolio without sacrificing any of the portfolio’s expected return.[1]

This approach to diversification was introduced by Harry M. Markowitz in his ground-breaking 1952 paper, Portfolio Selection.[2]

The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.[3]


  1. Francis, Jack Clark; Kim, Dongcheol (213). "Modern Portfolio Theory". "John Wiley & Sons, Inc.". p. 120. ISBN 9781118417201.
  2. Markowitz, H.M. (March 1952). "Portfolio Selection". pp. 77–91. Unknown parameter |publication= ignored (help)
  3. Diversification Definition | Investopedia. Retrieved January 7, 2017.

Further reading

External links