KIC000021 - becomes more attractive (Why?) We can now...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
r Diversification Non- Systematic Number of A.sse15 Feasible Portfolios With N Risky Assets Expected Return E(R;) Std dey O"j Dominant and Efficient Portfolios Expected RetumE(R;) Risk and Return III A ~ Std dey 0"; Feasible Portfolios With N Risky Assets Feasible Set Expected Return E(R;) Efficient frontier Std dev (Jj Minimum Variance Portfolio Expected Return E(R;) Minimum Variance -Portfolio Std dey (Ji
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
---------------- Minimum Variance Portfolio (with 2 risky assets) Utility Maximization .> Expected Return E(R;) The following formula gives the weights for the minimum variance portfolio comprised of only two assets: For more than two assets, matrix algebra is required. f'~ Utility maximizing l risky-esset portfolio , What if a risk-free asset is available in addition to the risky asset? The feasible set of portfolios
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: becomes more attractive (Why?) We can now identify an <:p\?moJ rt~t\f portfolio which dominates all other risky portfolio (irrespective of risk preferences) The optimal (tangency) portfolio has the highest Sharpe ratio among all feasible portfolios Std dev OJ The Market Portfolio has the Highest Sharpe Ratio of Any Risky Portfolio Capital Market Line Expected Return E(R;) Std dev OJ A World with One Risk-free Asset and N Risky Assets Capital Markel Line Expected Return E(R;) Riskless Asset /;1,- . ~-Old Efficient v=---~ Frontier Portfolio ~ Std dev OJ Utility Maximization with a Risk-free Asset ~ Expected Return E(R;) Old Efficient Frontier Std dev OJ...
View Full Document

Page1 / 2

KIC000021 - becomes more attractive (Why?) We can now...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online