Question
You are managing a passive portfolio, which is the Dow Jones portfolio. Two months ago, you allocated weights for the 30 stocks in this portfolio
You are managing a passive portfolio, which is the Dow Jones portfolio. Two months ago, you allocated weights for the 30 stocks in this portfolio by minimizing its variance and by targeting a 7% return rate. As you had 1M dollars, you bought shares of the stocks in this portfolio based on the resulted optimal weights. Today, you wanted to check on your portfolio, and you found out that your weights of each stock have changed and the portfolio expected return is 7.084%. Now, do you think you need to adjust your target return which was 7%? If so, what would it be? Explain.
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