Which statement is not true regarding the market portfolio?
A) It includes all publicly-traded financial assets.
B) It lies on the efficient frontier.
C) All securities in the market portfolio are held in proportion to their market values.
D) It is the tangency point between the capital market line and the indifference curve.
E) All of the options are true.

Question

Quizplus · Accepted Answer

The market portfolio is indeed the tangency point between the Capital Market Line (CML) and the efficient frontier, not an indifference curve. Indifference curves represent investor preferences in the risk-return space, while the CML represents the risk-return trade-off in the market. The efficient frontier represents portfolios that offer the highest expected return for a given level of risk.

Which Statement Is Not True Regarding the Market Portfolio