Finding The Efficient Set Using The Critical Line Technique And EXCEL

Abstract

This paper extends the discussion of the critical line approach using three risky stocks as described in Haugen’s Modern Investment Theory, 4^th edition. A dynamic presentation of the concepts involved in finding the efficient set, using two EXCEL spreadsheets and an HP-12C hand-held calculator, is provided. This dynamic presentation will enable students to understand the composition of the efficient set in a much clearer and effective manner.