Markets: A Rigorous Course

M14 · Problem 1 ★

Every portfolio covaries equally with the GMV

Prove that for any fully invested portfolio ww (1⊤w=1\mathbf 1^\top w = 1), Cov⁡(Rw,RGMV)=1/A=σGMV2\operatorname{Cov}(R_w, R_{GMV}) = 1/A = \sigma^2_{GMV}. Deduce that the GMV portfolio is the unique minimum-variance portfolio without using Lagrange multipliers.

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