Question

In the typical Mean-Variance Optimization framework (as taught within the class), the sum of portfolio weights...

In the typical Mean-Variance Optimization framework (as taught within the class), the sum of portfolio weights must be less than or equal to ____ and each asset considered must have a weight that is at least ______.

{0, 0}

{1, 1}

{1, 0}

{0, 1}

Homework Answers

Answer #1

The sum of the weights must be equal to 1 and each asset considerd must have a weight that is at least 0.

Option C is correct {1,0}

Option A {0,0} is incorrect because it says the sum of the weights of all the assets is zero. This means no money is invested in any of the assets.

Option B {1,1} is incorrect because it says we need to invest minimum 100% in each of the assets. In this case we would have only one asset.

Option D {0,1} is incorrect because it says the sum of the weights of the assets = 0 and the minimum weight in each asset is 100%. This contradicts itself.

Can you please upvote? Thank You :-)

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