Restricted Frontier the Unrestricted Frontier the Individual Essay

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Restricted Frontier

The Unrestricted Frontier

The Individual of Five Assets, Equally Weighted Portfolio, Efficient Frontier and CAL

Did you observe any differences between the restricted and unrestricted efficient frontier developed using your portfolio? Why?

Using my portfolio, I did observe differences between the restricted and unrestricted efficient frontier. For example, the restricted frontier has been pulled up on the chart and greatly affected by Australian bonds, as well as the accessibility of cash, to a point where the curve appears to be unequal. This means that the unrestricted efficient frontier, affected by bank accepted-bills, is not "pulling its equal weight," so to speak (Bodi 2011). This means that there is an imbalance in the economic performance of cash flow in New Zealand. Given the current economic situations, this is not necessarily a surprise, and more of an expectations. I would assume that as the economy begins to even out, so will the equality of the curve on my graph. However, the curve is currently uneven, which can be seen as reflection of the uneven state of the economy.

Using your graph, discuss the concept of the Markowitz Portfolio Theory and the CAPM. Clearly show that using a risk-free asset, you are able to obtain a higher return for a given risk.

(a) Describe each of the asset classes, setting out their characteristics and risks.

According to the Markowitz Portfolio Theory, we will see a pull between AM and GM measures as well as the restricted and unrestricted frontier.

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There will be a push-pull scenario in both situations. Therefore, the characteristics and risks present in the concepts graphed above are highly affected by the economy. For instance, the portfolio developed reflects on Australian and International bonds, cash in the economy, property values, and bank-accepted bills. Obviously, the economic situation affects each of these concepts, and the reflection can be seen in the graph plotted below. There is a general relationship between these two concepts and they work in an intertwined relationship.

b. Graph

GM Yield

Bonds Property Australian shares International shares

1983

4.9

15.67

1.7

1 / 5

1984

3.8

22.45%

1.2

1.2

1985

3.2

15.79%

.6

.6

1986

2.3

15.13%

.9

.9

1987

1.9

17.39%

1.2

1.2

1988

1.8

1.4

1.4

1989

2

11.11%

2.2

2

1990

2

1.1

1.2

1991

2

1.4

.6

1992

2.6

.9

.9

1993

2.5

2.3

2.2

1994

2.3

1.1

1.2

1995

2.3

1.2

.6

1996

2.6

1.9

.9

1997

2.8

2

1.2

1998

2.9

1.4

1.4

1999

3.1

1.8

1.1

2000

3.6

1.1

1.2

2001

4.2

1.1

1.2

2002

4.1

1.1

1.2

2003

4.1

1.3

.6

AM Yield

Bonds Property Australian shares International shares

1983

4.9

15.67

1.7

1 / 5

1984

4.8

22.45%

1.2

1.2

1985

3.2

15.79%

.6

.6

1986

2.3

11.13%

.9

.9

1987

1.9

12.39%

3.2

1.2

1988

1.8

3.4

1.4

1989

2

11.11%

2.2

2.2

1990.....

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