In an old exam - I combined the tangency portfolio (highest sharpe) with the RF portfolio. The guideline answer did not use the RF portfolio… what should we do if this comes up? Also, to confirm the RF portfolio is a negative weight, ie that means the portfolio is borrowed correct? Thanks…
PhillyBanker Wrote: ------------------------------------------------------- > In an old exam - I combined the tangency portfolio > (highest sharpe) with the RF portfolio. > > The guideline answer did not use the RF > portfolio… what should we do if this comes up? They will have to tell you if borrowing is allowed here or not. Was the required return above or below that of the corner with the highest sharpe ratio? > > > Also, to confirm the RF portfolio is a negative > weight, ie that means the portfolio is borrowed > correct? > Yes.
Dubs you are the man, thanks.