I'm trying to find a concept on this question,in my understanding investors differ on risk preference,the question said investors hold efficient portfolios because they are generally risk averse? agree or disagree with some explanation..
1 Answer
$\begingroup$
$\endgroup$
By definition, an efficient portfolio is one that is "best in its (risk) class." That's the main rationale for holding it.
There are some efficient portfolios for risk averse investors (low risk, accompanied by relatively low return), and others for risk loving investors (high risk, highest return). But in either case, they are (by definition) the highest return portfolios available for their risk levels.