Consider a capital market with only two risky assets A and B. Their standard deviations are 1 and 2, respectively. There is no risk-free asset. When the correlation coefficient ρAB = 0, construct a portfolio, whose variance is strictly less than 1. [Hint: you may want to try the portfolio that puts more weight on the security with the lower standard deviation.]
Consider a capital market with only two risky assets A and B. Their standard deviations are 1 and 2, respectively. There is no risk-free asset. When the correlation coefficient ρAB = 0, construct a portfolio, whose variance is strictly less than 1. [Hint: you may want to try the portfolio that puts more weight on the security with the lower standard deviation.]
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter1: Functions
Section1.2: The Least Square Line
Problem 5E
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Consider a capital market with only two risky assets A and B. Their standard deviations are 1 and 2, respectively. There is no risk-free asset.
When the
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