The ubiquitous efficient frontier excludes risk-free investments in its portfolio construction whereas CML hedges with them according its slope which is defined by the sharpe ratio of its market portfolio. Harry Markowitz, a professor of economics at the University of California, San Diego’s Rady School of Management known for pioneering the initial precepts of mean variance analysis and whose work was foundational to modern portfolio theory contends that the intercept point of CML and efficient frontier results in the most efficient portfolio called the tangency portfolio.
Introductory Video by Garud Iyengar:
No comments:
Post a Comment