Which statement is not true regarding the market portfolio? a. It lies on the efficient frontier.b. It is the tangency point between the capital market line and the efficient frontierc. It includes all publicly traded financial assets.d. It is a equally-weighted portfolio.
Question
Which statement is not true regarding the market portfolio? a. It lies on the efficient frontier.b. It is the tangency point between the capital market line and the efficient frontierc. It includes all publicly traded financial assets.d. It is a equally-weighted portfolio.
Solution
The statement that is not true regarding the market portfolio is:
d. It is an equally-weighted portfolio.
The market portfolio, in theory, includes all investable assets, and each asset is held in proportion to its market value relative to the total market value of all assets. Therefore, it is not equally weighted. The weights depend on the market values of the assets.
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