Abstract
The classical assumptions of the capital asset pricing model do not ensure obtaining a tangency (market) portfolio in which all the risky assets appear with positive proportions. This paper gives an additional set of assumptions that ensure obtaining such a portfolio. Our new set of assumptions mainly deals with the structure of the covariance matrix of the risky assets returns. The structure we suggest for the covariance matrix is of a two-block type. We derive analytically sufficient conditions for a matrix of this type to produce a long-only tangency portfolio (as well as a long-only global minimum variance portfolio).
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: International Journal of Portfolio Analysis and Management
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.