Corner Portfolio

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FrankCFA

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Will we be asked to calculate Corner Portfolio’s expected returns and standard deviations of return?
Or the test will only ask the asset-class weights in efficient portfolio via corner portfolio’s information?
Thanks!
 
Given that you’ve only learned how to calculate the standard deviation of returns for a 2-security portfolio, it’s unlikely that they’d ask you to calculate the standard deviation of returns for a corner portfolio. I doubt that you’d even have to calculate the expected return.
What they want you to understand is how to use those values from corner portfolios to calculate the expected return and standard deviation of returns for other portfolios.
 
They would ask which proportion should you divide your investment between the two securities/portfolios, which would be the best security to invest in and at what weight assuming you could short the risk-free rate (hint: best Sharpe Ratio), you could be asked to give the standard deviation of the corner portfolio (just a weighted average of the two securities/portfolios), and/or the total weights in each asset class.
But don’t worry, you aren’t likely to see a Q on Corner Portfolios in the AM session. (That would essentially be a gimmee.)
 
I see it being easy compartively of what I have studied. Betn. 2 corner portfolios the change of asset proportion is linear, assuming the portfolio is the one under qs. in the exam. Because of it’s linearity the return and the s.d. distribution are also linear. Linear s.d. is an overestimation of risk which is viewed positively, safely. Assets are weighted avg. of the 2 corner portoflios int he final asset.
Beyind this is there anything to think of? Magician Tozerrt you may like to put forth your views
 
ABAL- I think all of the testable points on Corner Portfolios have been mentioned.
 
there are a couple of additional things I could think of.
1. When to use the minimum variance portfolio + tangency with the risk free asset to determine allocation to a corner portfolio.
2. When to switch to using 2 Corner portfolios to make your calculation.
3. Sharpe ratio of the different portfolios presented and determination using that, if needed. This may tie into points (1) and (2) made by me above.
 
1. Constrained portfoilos with positive only weight, CAL specified, lending or safe asset scenario
2. Related
3. Related
Off hand the above comes to my mind. cpl123, you may want to correct me.
 
important thing is to note the keywords which tell you to approach the problem in a specific manner.
 
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