Reading 66: Portfolio Concepts Los i~1-2 return, related, problems

youzizhang

 

LOS i: Discuss reasons for and problems related to instability in the minimum-variance frontier.

Q1. What happens to the minimum-variance frontier when:

          return forecasts fall?    covariance forecasts fall?

 

A)    Curve shifts left                 Curve shifts down

B)    Curve shifts down            Curve shifts down

C)    Curve shifts down            Curve shifts left

 

Q2. Analysts trying to compensate for instability in the efficient frontier are least concerned about:

A)   small changes in expected returns.

B)   uncertainty in the forecast of variances and returns.

C)   a sharp rise in earnings restatements.

suodi

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