To lie on the Markowitz efficient frontier, an asset must have a __________ expected return than any other asset with the same standard deviation. The asset must also have a __________ standard deviation than any other asset with the same expected return.
A) higher: higher
B) higher; lower
C) lower; lower
D) lower; higher
E) Insufficient information.

Question

Quizplus · Accepted Answer

To lie on the Markowitz efficient frontier, an asset must offer a higher expected return for a given level of risk (standard deviation) than any other asset, and for a given level of expected return, it must have a lower level of risk. This ensures that all assets on the efficient frontier represent the best possible combinations of risk and return.

To Lie on the Markowitz Efficient Frontier, an Asset Must