If investors have homogeneous expectations,then each investor will identify ________ portfolio as having ________ Sharpe ratio in the economy.

Question

Quizplus · Accepted Answer

If investors have homogeneous expectations, then they will all have the same view of the economy, leading them to identify the same portfolio as the one with the highest Sharpe ratio. This is because in a world of homogeneous expectations, no investor believes they can possess information not known to others. Thus, all investors would behave in the same way and hold the same portfolio that gives the highest expected returns per unit of risk taken on.

If Investors Have Homogeneous Expectations,then Each Investor Will Identify ________