A good resource to learn about the intuition and optimization models behind Markovitz modern portfolio theorem

Question

I would like to learn about the Markovitz theory because I am going to interview at a financial firm that uses variants of it extensively.

I am looking for a resource to learn about the intuition and optimization models behind Markovitz modern portfolio theorem. Any pointer to a book or webpage would greatly help me.

Answer 1

There are a couple of options:

• Michaud (2008): Personally, I really like that book. It starts with an intuitive explanation of Markowitz theory and shows empirical shortcomings as well. It then gives a simple workaround (basically, a Monte Carlo simulation to reduce the impact of errors in input parameter estimation, to which the optimization is quite sensible to).
• Elton et al. (2009): This book probably never will be the most fun you ever read, but it is a very thorough introduction to modern portfolio theory.
• Markowitz on youtube: And why not listen to him himself ;-) I really like that interview, although it probably won't be enough for your interview.

Hope that gets you started.

Answer 2

I find the books of Kritzman very intuitive - yet mathematically accurate:

• Kritzman (2000): Very gentle introduction
• Kritzman (2003): Goes a little deeper but still very understandable