The Markowitz model is based on several assumptions regarding investor behaviour. Which of the following is not such any assumption?
A) Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period.
B) Investors maximize one-period expected utility.
C) Investors estimate the risk of the portfolio on the basis of the variability of expected returns.
D) Investors base decisions solely on expected return and risk.
E) None of the above (that is, all are assumptions of the Markowitz model)

Question

Quizplus · Accepted Answer

The Markowitz model indeed assumes that investors consider investments in terms of their expected returns and the variability of these returns, aim to maximize expected utility over a single period, and make decisions based on expected return and risk. Therefore, all the options listed are assumptions of the Markowitz model.

The Markowitz Model Is Based on Several Assumptions Regarding Investor