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Stock Market Instability: Some Implications from Portfolio Theory

Edward F. Renshaw
Financial Analysts Journal
Vol. 23, No. 4 (Jul. - Aug., 1967), pp. 80-83+87
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4470196
Page Count: 5
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Stock Market Instability: Some Implications from Portfolio Theory
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Abstract

The adjustment process implicit in the theory of portfolio selection first proposed by Markowitz can be used to enrich understanding of financial instability. When this model was applied to debit balances with brokerage firms, it was found that the stock market panics of 1962 and 1966 cannot be blamed on margin trading. The exoneration of speculators turns attention to operations by institutional investors conducted in the light of portfolio theory. New insights in this area can contribute to economic stability.

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