(t) 14 As the number of risky assets in a portfolio increases, the total risk of the portfolio decreases. (f) 15 Assuming that everyone agrees on the efficient frontier (given a set of costs), there would be consensus that the optimal portfolio on the frontier would be where the ratio of return per unit of risk was greatest.
A market timing approach that increases the proportion of funds in stocks when the stock market is expected to be rising, and increases cash when the stock market is expected to be falling is a: a. strategic asset allocation. b. tactical asset allocation.
E(R) = λ0 + λ1b1 + λ2b2 λ1 is the expected return on the asset with zero systematic risk. λ1 is the expected return on asset 1.
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