hard · Quantitative Finance

Which of the following conditions must hold for the tangency portfolio to be well-defined and unique in a standard mean-variance optimization?

1. The expected returns of all assets must be positive.
2. The covariance matrix Σ must be diagonal.
3. The risk-free rate r_f must be less than the expected return of the Global Minimum Variance portfolio.
4. The number of assets n must be greater than the number of observations in the sample.

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