In schweser, in reading 67 (PM), when describing Treynor Black....
RE: The graph showing A the actively managed portifolio, P the optimal risky portfolio and M the passive index portfolio along the efficient frontier... A, the actively managed one, produces a return/risk less "efficient" than the CAL. Why is that? I thought by actively managing a portfolio, giving weighting to high alpha, low risk assets the portfolio would be the optimal one and therefore lie where P does, on a tangent to the CAL?
Am I missing something really obvious here?
Thanks作者: maryli 时间: 2011-7-13 13:28
I understand it as:
A = actively managed portfolio (assume low number of stocks with positive or negative alpha). by itself, A is not efficient.
M = market portfolio
A+M = optimal risky portfolio
Combine A+M with risk free asset to get a portfolio that is more efficient than just M+risk free.
