Modern Portfolio Theory Assumptions

Investors are risk-neutral.

Investors have no preference between risk and returns.

Investors are rational and risk-averse. (correct)

Investors are influenced by market trends.

Investors are unaware of risk factors.

Investors have full and symmetric information. (correct)

Investors rely solely on historical data.

Investors can predict market movements accurately.

Investors invest based on emotional biases.

Investors use mean-variance optimization. (correct)

Investors do not diversify their assets.

Investors aim for maximum variance in their portfolios.

<p>Investors consider the correlation between asset returns.</p> Signup and view all the answers

<p>Investors’ risk preferences may change based on their financial goals.</p> Signup and view all the answers