 Portfolio analysis, which was developed in the 1950s by Harry Markowitz (1952), James Tobin (1958) and others, was an important step forward in the economic analysis of risk. These authors employed a simple statistical measure, namely the standard deviation (or alternatively the variance, that is the square of the standard deviation) as a measure of riskiness. Hence, in a comparison between two investment alternatives, the one whose economic outcome is calculated to have the largest standard deviation is regarded as the most risky one. In a comparison between different such alternatives, each of them can be characterized by two numbers, namely its expectation value and its standard deviation or riskiness. Investors typically prefer investments with as high expectation values and as low riskiness as possible. However, investors differ in the relative weight that they assign to expectations respectively risk avoidance. Given these decision weights, an individual’s optimal portfolio can be determined.