If investors possess homogeneous expectations over all assets in the market portfolio, when riskless lending and borrowing is allowed, the market portfolio is defined to:
A)be the same portfolio of risky assets chosen by all investors.
B)have the securities weighted by their market value proportions.
C)be a diversified portfolio.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

When investors possess homogeneous expectations over all assets in the market portfolio, the market portfolio is defined to be the same portfolio of risky assets chosen by all investors, weighted by their market value proportions, and is a diversified portfolio. Therefore, all of the above choices are correct.

If Investors Possess Homogeneous Expectations Over All Assets in the Market