Question
With the concept of the CAL, you should be able to draw a conclusion here: It is not necessary, and possibly not preferable, to see
With the concept of the CAL, you should be able to draw a conclusion here:
It is not necessary, and possibly not preferable, to see asset portfolios that have the characteristics of risk, or expected return, that you prefer.
Given a portfolio, it it carries more risk than you want, you can de-lever the portfolio by combining it with the Risk Free asset, lowering the risk (and, of course lowering the return commensurately), along the CAL.
So, instead of looking for the portfolio combination that has the risk/return characteristics closest to what we want, what should we be looking for with which to create a CAL allocation?
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