NOTES
Chapter 6
1. Before Markowitz (1959) distinguished between what we refer to as HDMs and RDMs, Simon (1947) made essentially the same distinction, characterizing the former as having “bounded rationality.” A hypothetical dialogue between Simon (1947) and Markowitz (1959), Plato-style, might have Markowitz (1959) saying,
I agree that humans are of bounded rationality. But some seek improvement in one area or another, as attested by the existence of a large number of “how to” books and magazines. I hope to help those who seek better ways to invest. My hypothesis is that practical approximations to rational decisions may serve this purpose.
We would hope that Simon (1947)’s response would have been supportive.
2. This note illustrates how ...
Get Risk-Return Analysis, Volume 2: The Theory and Practice of Rational Investing now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
