The dominant portfolio with the lowest possible risk measures is:
A) the efficient frontier.
B) The minimum variance portfolio.
C) The upper tail of the efficient set.
D) The tangency portfolio.

Question

Quizplus · Accepted Answer

The minimum variance portfolio is the portfolio with the lowest possible risk, as it is the portfolio with the lowest variance or standard deviation. This portfolio represents the combination of assets that provides the highest possible level of diversification. The efficient frontier represents the combination of portfolios that provide the optimal balance of risk and return. The upper tail of the efficient set is a specific subset of the efficient frontier that represents the portfolios with the highest returns and risk. The tangency portfolio is the portfolio that lies on the efficient frontier and has the highest Sharpe ratio.

The Dominant Portfolio with the Lowest Possible Risk Measures Is