liangfeng

B_C Wrote:
-------------------------------------------------------
> If E(R) > tangency portfolio and no short sale
> allowed.
> => choose 2 corner portfolio
>
> If E(R) > tangency portfolio and short sale is
> allowed.
> => Combine rf asset with the tangency portfolio
> (highest sharpe portfolio)
>
> If E(R) < tangency portfolio, whether short sale
> allowed or not
> => Combine rf asset with the tangency portfolio
> (highest sharpe portfolio)


hmm.. I hadn't thought of that last scenario, where if borrowing rf is not necessary then always use highest sharpe. though I suppose that is the optimal thing to do..

I was always going about it as:
shorting allowed --> highest sharpe + rf
not allowed --> adjacent porfolios