Using the orthogonal characterization of the mean variance frontier, show that for any mean variance efficient return R different from the minimum variance portfolio there is a unique mean variance efficient return Rz() satisfying Cov R , Rz() 0 Show that E Rz() E R E Re E (R)2 E R E R E R E R E R ...

The Answer is in the image, click to view ...

Using the orthogonal characterization of the mean-variance frontier, show that for any mean-variance efficient return R different

Question:

Using the orthogonal characterization of the mean-variance frontier, show that for any mean-variance efficient return Rπ different from the minimum-variance portfolio there is a unique mean-variance efficient return Rz(π) satisfying Cov[Rπ , Rz(π)] = 0.

Show that E[Rz(π)

] = E[R∗] − E[Re∗] E[(R∗)2] − E[Rπ ] E[R∗]

E[Rπ ] − E[R∗] − E[Rπ ] E[Re∗]

Fantastic news! We've Found the answer you've been seeking!