About portfolio allocation theory

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Reference no: EM131179906

Choose the statement which is most correct about portfolio allocation theory:

a. Investment in only a risk free asset is not an efficient portfolio, i.e., a portfolio invested in only the risk-free asset does not fall on the “best, feasible, capital allocation line.”

b. If the market is efficient, superior asset selection skills yield preferable results to asset allocation and efficient diversification techniques.

c. In creating a portfolio, the optimal combination of risky assets is independent of investor preferences; though investor risk preferences may determine how much of the total portfolio is invested in the risk-free asset versus the optimal portfolio.

d. An investor willing to accept more risk for higher return would increase her proportionate investment in the higher risk/higher return asset, since that is less risky than leveraging the portfolio.

e. The “best” portfolio combination of risky assets is the one with the lowest standard deviation.

Reference no: EM131179906

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