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Where is the Efficient Frontier


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  • Jing Chen

    (School of Business, University of Northern British Columbia, Prince George, BC, Canada)


Tremendous effort has been spent on the construction of reliable efficient frontiers. However, mean-variance efficient portfolios constructed using sample means and covariance often perform poorly out of sample. We prove that, the capital market line is the efficient frontier for the risky assets in a financial market with liquid fixed income trading. This unified understanding of riskless asset as the boundary of risky assets relieves the burden of constructing efficient frontiers in asset allocation problems, and allows for much better asset allocation decisions. It greatly simplifies the exposition on investment theory.

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Bibliographic Info

Article provided by Danubius University of Galati in its journal Euroeconomica.

Volume (Year): (2010)
Issue (Month): 24 (March)
Pages: 22-25

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Handle: RePEc:dug:journl:y:2010:i:24:p:22-25

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Keywords: Capital market line; Efficient frontier; Riskless asset; Risky assets;


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Cited by:
  1. Ali Akbar Gholizadeh & Masoud Tahuri Matin, 2011. "Portfolio Selection in the Presence of Housing (An Iranian Case Study)," Iranian Economic Review, Economics faculty of Tehran university, vol. 16(3), pages 139-159, fall.


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