Market-clearing logic forces the single optimal portfolio to be the market itself

Evidence

If there was a single optimal portfolio, it was clear what that portfolio had to be. Prices would adjust such that no capital asset remained without an owner and every investor would hold every risky capital asset every stock, for instance in proportion to its market value. Sharpe: “When I finally broke out of [the view that there had to be more than one optimal portfolio of risky assets] I said `If there’s only one, it’s got to be the market portfolio. It’s the only way you can get everything to add up.” — Donald MacKenzie, An Engine, Not a Camera, 250

Categorization

• QUESTION: The market-clearing argument (‘the only way you can get everything to add up’) is doing surprisingly heavy lifting — worth tracing how much of CAPM’s normative force rests on an accounting identity rather than an empirical fact.
• XREF: connects to: Expected-value-only investing logically implies holding a single stock, not a diversified portfolio — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 207; Market-cap weighting avoids costly rebalancing that equal-dollar weights require — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1482