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Decisions in Economics and Finance

, Volume 30, Issue 1, pp 19–49 | Cite as

The origins of the mean-variance approach in finance: revisiting de Finetti 65 years later

  • Flavio Pressacco
  • Paolo Serafini
Open Access
Article

Abstract

In a recent critical review of de Finetti’s paper “Il problema dei pieni’’, the Nobel Prize winner Harry Markowitz recognized the primacy of de Finetti in applying the mean-variance approach to finance, but pointed out that de Finetti did not solve the problem for the general case of correlated risks. We argue in this paper that a more fair sentence would be: de Finetti did solve the general problem but under an implicit hypothesis of regularity which is not always satisfied. Moreover, a natural extension of de Finetti’s procedure to non-regular cases offers a general solution for the correlation case and shows that de Finetti anticipated a modern mathematical programming approach to mean-variance problems.

Mathematics Subject Classification (2000): 91B30, 90C20

Journal of Economic Literature Classification: G11, C61, B23, D81, G22

Keywords

Optimum Path Portfolio Selection Corner Point Golden Rule Critical Risk 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  • Flavio Pressacco
    • 1
  • Paolo Serafini
    • 2
  1. 1.Dipartimento di Finanza dell’Impresa e dei Mercati Finanziari, Università di Udine 
  2. 2.Dipartimento di Matematica e Informatica, Università di Udine 

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