easy · Quantitative Finance numerical
In the context of the Markowitz mean-variance framework, let Σ be the n × n covariance matrix of asset returns and μ be the vector of expected returns.
Which vector w represents the weights of the Global Minimum Variance (GMV) portfolio, subject to the constraint w^topmathbf1 = 1?
- w = fracΣ^-1μmathbf1^topΣ^-1μ, a tangency mix
- w = fracμmathbf1^topμ (ignores covariance matrix)
- w = fracΣ^-1mathbf1mathbf1^topΣ^-1mathbf1
- w = Σ^-1(μ - r_f mathbf1), unnormalized risky-asset tangency weights
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