Minimum variance and efficient set 39Two Fund Separation Theorem: combinations ofportfolios on the minimum variance set are again on the minimum variance set
RemarksOnce you found any two funds on the efficient set, it is possible to create all other mean-variance efficient portfolios from these 2fundsÄthere is no need for anyone to purchase individual stocksseparately!
It suffices to replicate mean and variance, since the prices of portfolios with the same mean and the same variance have to be the same (law of one price)!Single-period random cash flows: Mean-variance portfolio theory