Question

According to Tobin's separation property, portfolio choice can be separated into two independent tasks consisting of ________ and ________. A. identifying the optimal risky portfolio; constructing a complete portfolio from T-bills and the optimal risky portfolio based on the investor's degree of risk aversion B. identifying the investor's degree of risk aversion; choosing securities from industry groups that are consistent with the investor's risk profile C. choosing which risky assets an investor prefers according to the investor's risk-aversion level; minimizing the CAL by lending at the risk-free rate D. identifying all investor imposed constraints; identifying the set of securities that conform to the investor's constraints and offer the best risk-return trade-offs

Answer 1

A A. identifying the optimal risky portfolio; constructing a complete portfolio from T-bills and the optimal risky portfolio based on the investor's degree of risk aversion