Table of Contents
Chinese Journal of Mathematics
Volume 2015, Article ID 737905, 17 pages
Research Article

Classical Ergodicity and Modern Portfolio Theory

Beedie School of Business, Simon Fraser University, Vancouver, BC, Canada V5A lS6

Received 6 February 2015; Accepted 5 April 2015

Academic Editor: Wing K. Wong

Copyright © 2015 Geoffrey Poitras and John Heaney. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


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.