Seminar Philosophy of Financial Markets Behavior

This seminar paper deals with historical development of the way we view the hustle and bustle of events that constitute a system of financial market. The story starts in the year of 1900 when, then young mathematician Louis Bachelier used mathematics of what is now known as Brownian motion to describe movements of price of assets traded on Paris Bourse. His work, after being over-looked for more than half a century, was then adopted by some of the promi-nent economists of 20th century, of whom Harry M. Markowitz and William F. Sharpe and their contribution to the Modern theory of finance (MTF) will be dealt with specifically. The concepts devel-oped were part of every financial adviser’s or analyst’s toolkit in form of frame of thinking and software support, but came under major scrutiny after some catastrophic market breaks occurring throughout the otherwise very prosperous 90’s. Better late than never, would ar