I recently started learning about finance and we talked about Markowitz Portfolio Theory. I understand that a portfolio consists of different assets, each of them with a certain weight. So, for example, I could have a portfolio with 50% Exxon Mobil and 50% IBM.
However, we then mentioned that if we are allowed to short IBM, for example, we could end up with a portfolio of "weights" 120% Exxon Mobil and -20% IBM. Then, the expected return calculation would yield 1.2 * (Expected return of Exxon) - 0.2 * (Expected return of IBM).
I am a little confused how this calculation makes sense. How could I have more than 1.0 for a weight of a portfolio. My professor mentioned something about using the short to "lever up" investment in Exxon, but I'm not quite sure how to make senes of that.