Portal de Periódicos da CAPES

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

2007; Springer Science+Business Media; Volume: 30; Issue: 1 Linguagem: Inglês

10.1007/s10203-007-0067-7

1593-8883

Flavio Pressacco, Paolo Serafini,

Economic theories and models

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