Consider an economy with a risk free asset with return (r_{f}) and (N) risky assets with i.i.d.
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Consider an economy with a risk free asset with return \(r_{f}\) and \(N\) risky assets with i.i.d. random returns \(\tilde{\mathbf{r}}=\left(\tilde{r}_{1}, \ldots, \tilde{r}_{N}\right)\). Show that the two mutual funds separation property holds with respect to the risk free asset and the equally weighted portfolio \((1 / N, \ldots, 1 / N)^{\top}\) of the risky assets.
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Related Book For
Financial Markets Theory Equilibrium Efficiency And Information
ISBN: 9781447174042
2nd Edition
Authors: Emilio Barucci, Claudio Fontana
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