Market portfolio

The market portfolio consists of the weighted sum of each plant of the market. It is the best diversified portfolio in the portfolio theory or in the Capital Asset Pricing Model (CAPM ), which is independent of the risk-return preferences of investors. Consequently, the market portfolio is on the efficient frontier and is also the Tangentialportfolio to the capital market line. Using a combination of the riskless asset and the market portfolio can then be formed, the capital market line. In the CAPM, the market portfolio is defined as having a beta () of one and has because of the perfect diversification across all facilities only systematic risk (market risk) on.

  • Capital Market Theory
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