Select the correct statement regarding the market portfolio. It:
A) is readily and precisely observable.
B) should include all risky assets.
C) is the lowest point of tangency between the risk-free rate and the efficient frontier.
D) should be composed of stocks or bonds.

Question

Quizplus · Accepted Answer

The market portfolio, according to the Capital Asset Pricing Model (CAPM), should include all risky assets, not just stocks or bonds, but all investable assets including real estate, precious metals, and even human capital, to fully diversify and represent the entire market.

Select the Correct Statement Regarding the Market Portfolio