This preview shows pages 1–9. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Special ρ B B A A p B B A A W W r E W r E W r E σ + = + = ) ( ) ( ) ( p 7 Minimum Variance Portfolio (with 2 risky assets) ( 29 A W B W B A B A B A B A B A B A W=+= 1 , 2 2 2 , 2 ρ σ 8 What if a riskfree asset is available in addition to the risky assets? • The feasible set of portfolios becomes more attractive ( Why? ) • There is an optimal risky portfolio which dominates all other risky portfolios (irrespective of risk preferences) • The optimal (tangency) portfolio has the highest Sharpe ratio among all feasible portfolios 9 Optimal risky portfolio in presence of a riskfree asset Standard Deviation Expected Return Riskfree C B A CAL for Portfolio C CAL for Portfolio B CAL for Portfolio A Optimal CAL has the steepest slope....
View
Full
Document
This note was uploaded on 09/27/2010 for the course BUSINESS 6F:111 taught by Professor Tongyao during the Spring '09 term at University of Iowa.
 Spring '09
 TongYao
 Management

Click to edit the document details