January 27, 2020

The data presented and analyzed are consistent with the implication that in a mean variance world, the Market Portfolio is an efficient portfolio with the highest Sharpe Ratio. The data presented shows that in every instance, the equity risk/return combinations are below the Market Line. These results suggest that even if one knew the risk/return combinations with certainty, it would be impossible to develop a long only allocation that delivered a higher Sharpe ratio than that of the market portfolio, GME. The implications derived are straight forward. The first one being that the fact that the market portfolio has the higher Sharpe Ratio, investors should consider a GME based index strategy. For those pursuing an active investment strategy GME is a good starting point.

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