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Harry Markowitz and the Early History of Quadratic Programming

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Handbook of Portfolio Construction

Abstract

Despite his fame as the father of modern portfolio selection theory, Harry Markowitz’s pioneering efforts in the methodology of quadratic programming are surprisingly obscure. This article is primarily about Markowitz’s critical line algorithm as a contribution to the early history of quadratic programming (as distinct from the more specialized portfolio selection problem). After documenting our claim that the critical line algorithm received scant attention around the time of its introduction, we discuss some factors that may have led to this state of affairs. We then elaborate an argument for the repeatedly made assertion that Markowitz’s critical line algorithm and Philip Wolfe’s simplex method for quadratic programming are equivalent. We do this by relating both of them to the parametric principal pivoting method of quadratic programming and linear complementarity theory.

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Authors and Affiliations

  1. Department of Management Science and Engineering, Stanford University, Stanford, CA, 94305–4026, USA

    Richard W. Cottle & Gerd Infanger

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  1. Richard W. Cottle
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  2. Gerd Infanger
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Correspondence to Richard W. Cottle .

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Editors and Affiliations

  1. McKinley Capital Management, LLC, 3301 C. Street, Anchorage, AK, 99503, USA

    John B. Guerard Jr.

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Cottle, R.W., Infanger, G. (2010). Harry Markowitz and the Early History of Quadratic Programming. In: Guerard, J.B. (eds) Handbook of Portfolio Construction. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-77439-8_8

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