problem is to use indexes as the underlying asset and infer from index allocation the allocation to specific investments that have the index as their benchmark. A major take-away is that in practice, where short-selling is prohibited, the CML will not be linear. Thus, investors desiring a return greater than that delivered by the optimal portfolio must select an optimal portfolio for a higher return. However, the result will be a less efficient portfolio in terms of excess risk per unit of return. References Bodie, Z. Kane, A. & Marcus, A. (2014). New York: McGraw-Hill Investments, 10th Edition. Education. Brigham, E. & Ehrhardt, M. (2014). Financial Management: Theory and Practice, 14th Edition. Mason, OH: South-Western, Cengage Learning. Brinson, G. P., Hood, L.R. & Beebower, G.L. (1986). Determinants of portfolio performance. 3944. Financial Analysts Journal, 42, Brinson, G. P., Singer, B.D. & Beebower, G.L. (1991). Determinants of portfolio performance II: An update. 4048. Financial Analysts Journal, 47, Cass, D., & Stiglitz, J.E. (1970). The structure of investor preferences and asset returns, and separability in portfolio allocation: A contribution to the pure theory of mutual funds. 122160. Journal of Economic Theory, 2, Chamberlain, G. (1983). A characterization of the distributions that imply mean-variance utility functions. 185201. Journal of Economic Theory, 29, Ibbotson, R G. (2010). The importance of allocation. 1820. Financial Analysts Journal, 66,
problem is to use indexes as the underlying asset and infer from index allocation the allocation to specific investments that have the index as their benchmark. A major take-away is that in practice, where short-selling is prohibited, the CML will not be linear. Thus, investors desiring a return greater than that delivered by the optimal portfolio must select an optimal portfolio for a higher return. However, the result will be a less efficient portfolio in terms of excess risk per unit of return. References Bodie, Z. Kane, A. & Marcus, A. (2014). Investments, 10th Edition. New York: McGraw-Hill Education. Brigham, E. & Ehrhardt, M. (2014). Financial Management: Theory and Practice, 14th Edition. Mason, OH: South-Western, Cengage Learning. Brinson, G. P., Hood, L.R. & Beebower, G.L. (1986). Determinants of portfolio performance. Financial Analysts Journal, 42, 3944. Brinson, G. P., Singer, B.D. & Beebower, G.L. (1991). Determinants of portfolio performance II: An update. Financial Analysts Journal, 47, 4048. Cass, D., & Stiglitz, J.E. (1970). The structure of investor preferences and asset returns, and separability in portfolio allocation: A contribution to the pure theory of mutual funds. Journal of Economic Theory, 2, 122160. Chamberlain, G. (1983). A characterization of the distributions that imply mean-variance utility functions. Journal of Economic Theory, 29, 185201. Ibbotson, R G. (2010). The importance of allocation. Financial Analysts Journal, 66, 1820.
Optimal-Risky-Utility-Maximizing-TIAACREF-Portfolios-GJAF-submission-5ac48a97a8d5b.docx