Unstable minimum variance efficient frontier is attributed to
1. Short sale constraint
2. Historical Betas
A. Yes
B. No, incorrect about Short sale constraint
C. Incorrect about historical betas.
Can anybody explain.
A.
Historical betas used in the outputs - can change - resulting in a shift in the minimum variance frontier.
Short Sales - small changes in the inputs (mean, variance, covariance of assets) would result in identifying some asset to be sold short - which impacts the frontier for the future.
question asks why in MVF unstable - the answer is b/c it requires many large short positions..
the answer given above in the mock question is a remedy to correct for instability - not a cause
发表于 2013-4-12 21:52
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