Book 2 of Schweser Notes, page 92 states that the ERP for markets assuming full segmentation will have a correlation of 1 with the global market portfolio. Shouldn't it be for full integration as full integration = capital flowing freely = assets with same risk will have same return = correlation is +1.0...?
Additionally, anyone know the link that posts all the misprints on schweser notes?
Thanks.作者: liangfeng 时间: 2011-7-13 16:29
I think that if the market is totally segmented, it should be correlation of 1 with the local market portfolio. In both the CFA and Schweser examples, however, they assume that the global market portfolio has the same sharpe ratio as the local market portfolio, which isn't necessarily the case.
