Anyone care explaining this to me? Just not sinking in for some reason. Thanks in advance for the help!
In a constrained optimization (no short sales) when an asset weight goes from zero to positive, or positive to zero a corner portfolio pops up on the efficient frontier. Any expected return on the efficient frontier can be obtained by combining an optimal weighting of the two adjacent corner portfolios. Just set E® = target return and solve for the weight of corner Portfolio 1. Weight of the second portfolio is 1-W(1).