The asset allocation process asks us to: (a) Determine how much to invest in the...
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Finance
The asset allocation process asks us to: (a) Determine how much to invest in the risk-free asset (b) Determine how much of the optimal risky portfolio will be held in bonds and how much will be held in equities (c) Adjust our investments based on our level of risk aversion (d) Determine the minimum variance portfolio, which will be our optimal invest- ment decision Which of the following is not a problem with assuming a normal distribution for returns (a) Expected values and variances only exist for normal distributions (b) In reality, we only care about downside risk, not overall variance (c) In reality, returns have a limited possible loss (d) Empirical evidence suggest that extreme gains and losses happen more fre- quently than the normal distribution predicts
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