The five largest tech companies (Google, Apple, Facebook,
Amazon, Microsoft or GAFAM) now make up 20% of the S&P 500 (the
market portfolio). This problem aims to quantify the consequence of
this increasing concentration for investors.
We assume that the entire security market is made of only three
types of assets: a risk-free asset (rf = 3%) and two risky
securities G (a portfolio composed by investing in the five GAFAM
stocks) and B (a portfolio composed by investing in...