The following figure is from the 4th Excel assignment. We c…
The following figure is from the 4th Excel assignment. We consider the investment implication of shifting portfolio weights gradually from the index fund to AMD. The left chart below plots portfolio’s mean return against the weight on AMD. We see a up-ward sloping line, that is, as we increase portfolio weight on AMD, the portfolio mean return increases. Which of the following formula correctly calculate the slope of the line. (Note, subscript i indicates for AMD, and subscript m for “market” proxied here by the index fund.)