All of the following are assumptions of the Markowitz model EXCEPT
A) risk is measured based on the variability of returns.
B) investors maximize one-period expected utility.
C) investors' utility curves demonstrate properties of diminishing marginal utility of wealth.
D) investors base decisions solely on expected return and time.
E) there are no tax costs involved.

Question

Quizplus · Accepted Answer

The Markowitz model assumes that investors consider both expected return and risk (measured based on the variability of returns), that investors maximize expected utility over a single period of time, that investors' utility curves exhibit diminishing marginal utility of wealth, and that there are no tax costs involved. Therefore, the assumption that investors base decisions solely on expected return and time is not part of the Markowitz model.

All of the Following Are Assumptions of the Markowitz Model