Ken Jones is the founder and president of PSS. He has authored the book and software package as well as dozens of research papers. Portfolio Management is a quantitative investment book published by McGraw-Hill in 1992. PSS Release 2.0: with the Digital Portfolio Theory optimization engine is a state of the art software package published in 1997. This new approach enables the user to find optimal diversified portfolios of investments while controlling calendar, systematic and fundamental risk. Professor Jones has been actively pursuing research in applying digital signal processing to the portfolio network model to solve the portfolio selection problem since 1982.
In 1984 Ken attended the American Finance Association conference in New York City. “I was an enthusiastic new Ph.D. student. I took my working paper describing the benefits to portfolio theory of describing risk in a signal processing framework. I was anxious to get comments on my idea so I went to Harry Markowitz’s room. Unfortunately he was not in his hotel room so I left the paper with a note. I was pleasantly surprised that evening when Professor Markowitz called and said he was interested in my paper and suggested we meet for breakfast the following morning. The next morning I meet the very tall, friendly unassuming professor and he suggested we eat in a small coffee shop across the street from the hotel. We had fried eggs and I explained to Harry that by defining risk in signal processing terms not only did you add a time dimension to his portfolio selection model but the non-linear portfolio selection problem became a linear programming problem as well. He was quite encouraging and inspired me to continue my research. From then on I continually solicited his comments and he never failed to comment and provide information about his own research. If anyone ever deserved the title of “Father of Finance” it is Harry Markowtiz, always supportive, always encouraging as we would expect a true father to be.
At breakfast Markowtiz confided in me that he considered himself first and foremost a management scientist. Although I was a finance Ph.D. student at the University of Colorado in Boulder, I had the good fortune to have Professor Fred Glover, the well know management science professor and expert in network optimization on my dissertation committee. In fact I had conceived of my proposed model while reading a working paper using network techniques to solve asset allocation problems written by Professor Bruce Golden and K.D. Keating at the University of Maryland. I had arrived in Boulder a couple of weeks before school started to get a start on my dissertation. I went into Professor Glover office and he gave me some of the working papers he had littered about his office that related to finance. The paper attempted to apply the deterministic network model to single and multiple period portfolio theory. I was living at a campsite since I had not found an apartment yet for the school year. I remember sitting at a picnic table with a view of the Boulder’s shear rock cliffs, I was reading the paper and suddenly my engineering background kicked in and I saw the money flowing through the portfolios as the motion of electrons.” Dr. Jones realized that the monetary flow in the portfolio networks could be made stochastic by using the frequency domain description of risk. The network optimization problem under uncertainty would remain the same as the deterministic problem except for additional flow conservation constraints on risk that could be derived using phasor algebra.
Both Arthur Roy and M.F.M. Osborne went from the military profession of gunnery to the field finance. Arthur Roy simultaneously presented the portfolio theory model with Markowitz in 1952. M.F.M. Osborne was a physicist who applied the concept of Brownian motion to the stock market in 1959. Paul Samuelson also worked on radar servomechanisms for fire control against aircraft for the Navy during World War II. Similarly Ken Jones’ designed missile fire control systems to protect Navy destroyers from missile attack from the Russian SAM missiles after completing his undergraduate Engineering degree at the University of Michigan during the Vietnam War.
Following the Vietnam war Ken traveled in Europe and North Africa. With a friend he started a business importing sheep skin coats form Turkey for sale in Heidelberg, Germany and Innsbruck, Austria. Upon his return to the US he became a Ph.D. student in mathematics at Carnegie-Mellon University in Pittsburgh. After deciding to forgo a career in mathematics he began working for Carnegie-Mellon University’s computer center. Here he wrote his first book titled “How to Debug Fortran Programs using System Dumps.” In addition, he was in charge of the Carnegie’s hybrid computer center (a combined analog and digital computer)
Following his work at Carnegie-Mellon University, Ken Jones became a system analyst for the Midwest Stock Exchange in Chicago designing computer software for security order execution and confirmation between brokerage houses and their brokers on the exchange floor. Finding Chicago friendly but too cold in winter he applied for and received a scholarship to do an MBA degree at the University of Florida. At Florida he became Professor Eugene Brigham’s research assistant for 2 years. In this capacity he had extensive experience doing financial empirical studies using CRSP and Compustat security data bases.
Upon finishing his MBA in Finance from the University of Florida, Ken took time out for a trip around the world before beginning work on a Ph.D. in finance at the University of Colorado. He traveled by bus from Amsterdam to India and then to Nepal continuing to Thailand, Hong Kong, Korea and Japan. In India he became interested in yoga and continues to be a practitioner and student of yoga to the present day. At the University of Colorado in Boulder he met Professor Fed Glover, a well known researcher in operations research. Fred served as a member on Ken’s dissertation committee. Ken’s dissertation presented the stochastic portfolio network optimization model and derived Digital Portfolio Theory for the first time. Since completing his Ph.D. in finance Ken has devoted his research and efforts to promoting and enhancing this new theory of financial signal processing.
Professor Jones has served as visiting professor at the University of Delaware, Department of Finance. He was Amoco Chair Professor of Management in the School of Business, at the American University in Cairo for three years. He previously held appointments at the University of Florida in Gainesville, and at the University of Petroleum & Minerals in Saudi Arabia. He teaches courses in Portfolio Management, Investments, Derivatives, International Finance, and Corporate Finance.
Ken Jones is the most innovative and penetrating researcher in the field of financial theory in America today.
