The dominant portfolio with the lowest possible risk is:
A) the efficient frontier.
B) the minimum variance portfolio.
C) the upper tail of the efficient set.
D) the tangency portfolio.
E) None of these.

Question

Quizplus · Accepted Answer

The minimum variance portfolio is the portfolio that has the lowest possible risk, achieved by minimizing the portfolio's variance. This portfolio is constructed by selecting the combination of assets that has the lowest covariance or correlation with each other. Therefore, the minimum variance portfolio is the dominant portfolio with the lowest risk.

The Dominant Portfolio with the Lowest Possible Risk Is