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7#
发表于 2011-7-11 19:41
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The market portfolio is every security in the world. If every asset is fairly priced (sits on SML line), then each one provides the correct amount of return for the correct amount of risk. Plus, each security added provides incremental diversification benefit (lowers the volatility).
1) Removing assets with returns higher than the market portfolio would lower the return & increase the volatility by decreasing diversification (lower Sharpe).
2) Removing assets with returns lower than the market portfolio would increase returns, but increase the volatility of the portfolio by a great amount (again, lower Sharpe).
If you don't believe this, then rework the table on page 154 of Schweser, Book 5 by hand. Or look at figure 1 on page 150. Both illustrate the math involved, on a smaller scale.
"1. There are infinite number of portfolios with the same Sharpe ratio as the market porfolio."
Just reference page 162 of book five. Again, it may not be intuitive, but that's how the math works out. As you change the mix of the market portfolio and the rf asset, the volatility of the portfolio and the expected return both increase and decrease linearly. For each additional % of return added, volatility increases proportionally, thus the Sharpe ratio will remain constant.
"2. These portfolios all have market portfolio in them"
You are essentially dialing the risk and return of the market portfolio up and down by mixing in the rf asset. |
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