For each investor h = 1,...,H, let h denote the optimal portfolio presented in (14.24). Using the

For each investor h = 1,...,H, let πh denote the optimal portfolio presented in (14.24). Using the notation of Section 14.6, set τh = 1/αh for each investor h. Then, (14.24) implies Whπh = τh−1

(μ− rι) −



j=1

τhηhj−1

σ νj .

(a) Deduce that

μ− rι = αWπ +



j=1

ηjσ νj , (14.33)

where π denotes the market portfolio

π = H h=1 Wh W

πh .

(b) Explain why (14.33) is the same as the ICAPM (14.31).