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The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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Chapter 3: Harry Markowitz Brings Statistical Man to the Stock Market

The modern quantitative approach to investing is assembled out of equal parts poker strategy and World War II gunnery experience.

Holbrook Working was far from the only economist to contribute his number-crunching skills to the Allied cause in World War II. Here’s the kind of thing Milton Friedman spent the war years doing:

You have an anti-aircraft shell, and you can control its fragmentation. You can score it in such a way that it will break up in pieces of specified size. What size pieces do you want? Would you rather have 600 small pieces or 20 big pieces? If they’re big, when they hit the enemy aircraft they’ll do real harm, but if you only have two pieces there’s ...

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