This conclusion starts from the premise that no one knows what will be the asset that performs great and what assets will perform poorly, and thanks to the diversification effect the risk will be risk reduced to just the systematic risk eliminating the specific risk, right? Because of course if I know for sure that in the future Tesla will outperform every other asset I will just invest in Tesla and I'll not take any other asset that will reduce my return. So the Market portfolio will give me, in respect of every other portfolio, the highest Sharpe Ratio, because the denominator of the Sharpe Ratio will be the smallest compared to every other portfolio, because it is the one that truly has eliminated the specific risk bearing just the systematic risk. Did I get it? Thanks and keep going with the amazing explanations man.
Not quite :(. If you know that Tesla will have a great year and pay a lot of dividends, then Tesla will have a high price today, so that it has an EQUILIBRIUM return. The point is that no asset is expected to outperform the others, because if it does, the price increases until the return decreases.
@@FinAndEconi think he is basically assuming that he knows something that maket doesn't, something that is not already factor in. but then again , i can be wrong
Hey can I have a quick chat with about investing in general. I am a high school student and I would really like to know about your take on investing for teenagers and beginners. Hoping for a reply soon.
This conclusion starts from the premise that no one knows what will be the asset that performs great and what assets will perform poorly, and thanks to the diversification effect the risk will be risk reduced to just the systematic risk eliminating the specific risk, right?
Because of course if I know for sure that in the future Tesla will outperform every other asset I will just invest in Tesla and I'll not take any other asset that will reduce my return. So the Market portfolio will give me, in respect of every other portfolio, the highest Sharpe Ratio, because the denominator of the Sharpe Ratio will be the smallest compared to every other portfolio, because it is the one that truly has eliminated the specific risk bearing just the systematic risk.
Did I get it? Thanks and keep going with the amazing explanations man.
Not quite :(. If you know that Tesla will have a great year and pay a lot of dividends, then Tesla will have a high price today, so that it has an EQUILIBRIUM return. The point is that no asset is expected to outperform the others, because if it does, the price increases until the return decreases.
@@FinAndEconi think he is basically assuming that he knows something that maket doesn't, something that is not already factor in. but then again , i can be wrong
Hey can I have a quick chat with about investing in general. I am a high school student and I would really like to know about your take on investing for teenagers and beginners. Hoping for a reply soon.
I am on Holiday for 1 month now, but contact me on LinkedIn and I will come back to you when I return