COMM 298 Lecture 22: 22.pdf
Document Summary
Recall: the efficient frontier (cid:77) the portfolio frontier" is a graphical representation of the risk/return combinations we can achieve by combining assets into portfolios. In this part of the course, we assume that expected returns and standard deviations of returns of the individual assets are known in advance. We first looked at the efficient frontier of all risky assets. Today we will introduce a riskfree asset and look at the efficient frontier of all assets. Short-selling and the efficient frontier (cid:77) allowing for short-selling extends the efficient frontier in both directions. You can confirm this by plugging in some additional values of xa and xb (cid:77) the picture below shows this for the case of !ab = 0. R e g i o n w h e r e x a < 0 a n d x b > 1.
