Recall that we discussed the concept of the Global Minimum Variance Portfolio in one of the...

Recall that we discussed the concept of the Global Minimum Variance Portfolio in one of the lectures and defined it as that portfolio on the efficient frontier that has the least risk. Now, consider a portfolio with only two assets, asset X, and asset Y. The returns of these assets are uncorrelated with each other. Asset X has a volatility of 9%, and asset Y’s volatility is 16%. What will be the weight of asset X in a minimum variance portfolio (MVP) of these two assets?

100%

24.04%

75.96%

97%

Solutions

Expert Solution

For a two-security portfolio, one can calculate the weights to achieve the minimum variance portfolio as follows:

jeff jeffy answered 1 year ago

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