in TB model, it says the final protfolio is passive portfolio+active portfolio. but I think we should add risk free asset, is risk free asset passive portfolio? to calculate return of portfolio based on CAPM, but beta is not given, can we calculate beta given risk free asset and portfolio1? my teacher says beta=Sigma of portfolio1 /Sigma of portfolio combined(portfolio 1 +risk free) why? I think beta=R*Sigma of portfolio combined/Sigma of market portfolio.
No… RF asset is not passive portfolio. Investing in the Dow 30 or S&P 500 is a passive portfolio. A PP is one that gives you the market return, you don’t have to spend analysis on doing research on that portfolio you don’t rebalance the portfolio because you’re tracking the market. So, under TB model you invest in - Treasury securities + Dow/S&P + Active portfolio. I didn’t understand the other questions, maybe someone else can explain them