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Portfolio Selection and Diversification In a two-asset portfolio, Describe and show graphically in return-standard deviation space what happens when an investor changes his/her allocation (the
- Portfolio Selection and Diversification
- In a two-asset portfolio, Describe and show graphically in return-standard deviation space what happens when an investor changes his/her allocation (the percentage invested in each asset) if the assets are i.) perfectly positively correlated, ii) perfectly negatively correlated, and iii) positively (not perfectly) correlated.
- As more potential risky assets become available, explain and show graphically the concept of the efficient frontier.
- Explain and show how risk averse investors will choose utility maximizing portfolios from the efficient frontier.
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