Rather than relying on the efficiency of a single portfolio (such as the market),multifactor models rely on ________ that an efficient portfolio can be constructed from a collection of well-diversified portfolios or factors.

Question

Quizplus · Accepted Answer

Multifactor models rely on the weaker condition that an efficient portfolio can be constructed from a collection of well-diversified portfolios or factors. This means that the portfolio does not need to depend on strong assumptions or conditions, but rather can be constructed from a variety of factors that have been shown to be effective in diversifying risk.

Rather Than Relying on the Efficiency of a Single Portfolio