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 all have the same views about the potential returns and risks of different portfolios. Therefore, they will identify the same portfolio as having the highest Sharpe ratio, which is the ratio of excess returns to volatility. In other words, they all agree on which portfolio offers the best risk-adjusted return.

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