Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2007/12:
Simplifying and generalizing some efficient frontier and CAPM related results
Steinar Ekern ()
Abstract: This paper simplifies, generalizes, extends, surveys and
unifies results related to the efficient frontier in portfolio analysis and
to asset pricing formulations of the Capital Asset Pricing Model (CAPM)
type. It derives the composition and properties of many central portfolios
in portfolio analysis. It also discusses and provides several CAPM type
formulations involving different portfolios. In particular, it states the
tangency portfolio in an instructive and very simple way, focusing on
similarities in going from the global minimum variance portfolio via a null
index portfolio whose zero beta portfolio has a zero expected return. The
Non-frontier zero beta, the Null index and the Augmented frontier CAPM
versions supplement standard CAPM formulations. More importantly, the GMVP
and the Benchmark versions of the CAPM do not rely on a zero beta
portfolio, but require two betas.
Keywords: CAPM types; Roll's approach; tangency portfolio; GMVP; benchmark; (follow links to similar papers)
JEL-Codes: G10; G11; G12; (follow links to similar papers)
27 pages, March 27, 2007
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