Classical Ergodicity and Modern Portfolio Theory

Resource type
Date created
What role have theoretical methods initially developed in mathematics and physics played in the progress of financial economics? What is the relationship between financial economics and econophysics? What is the relevance of the “classical ergodicity hypothesis” to modern portfolio theory? This paper addresses these questions by reviewing the etymology and history of the classical ergodicity hypothesis in 19th century statistical mechanics. An explanation of classical ergodicity is provided that establishes a connection to the fundamental empirical problem of using nonexperimental data to verify theoretical propositions in modern portfolio theory. The role of the ergodicity assumption in the ex post/ex ante quandary confronting modern portfolio theory is also examined.
Published as
Geoffrey Poitras and John Heaney, “Classical Ergodicity and Modern Portfolio Theory,” Chinese Journal of Mathematics, vol. 2015, Article ID 737905, 17 pages, 2015. doi:10.1155/2015/737905
Publication title
Chinese Journal of Mathematics
Document title
Classical Ergodicity and Modern Portfolio Theory
Publisher DOI
Copyright statement
Copyright is held by the author(s).
Scholarly level
Peer reviewed?
Member of collection
Attachment Size
737905.pdf 2.09 MB