If a risk-free asset is available and input lists are identical, all investors will choose the same

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If a risk-free asset is available and input lists are identical, all investors will choose the same portfolio on the efficient frontier of risky assets: the portfolio tangent to the CAL. All investors with identical input lists will hold an identical risky portfolio, differing only in how much each allocates to this optimal portfolio versus the risk-free asset. This result is characterized as the separation principle of portfolio construction. P-968

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ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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