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The market portfolio is a
theoretical notion used in portfolio theory.
Consider a universe of risky
investments available to an investor. The market portfolio is a
portfolio consisting of every issue weighted proportionality to
the total market
value of that issue outstanding in the
market.
For example, if we considered all the stocks that
comprise the S&P 500 stock index as our universe, then a
(market capitalization weighted) S&P 500
index fund would
represent a market portfolio.
A practical shortcoming of the notion of a market portfolio is the fact
that it depends upon the universe of risky assets considered. In many
applications, this is limited to domestic equities, but it could be extended to
include international equities, debt, real estate, etc.
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 beta
A metric of the systematic risk of a portfolio.
capital asset pricing
model—a model for asset pricing and portfolio construction.
capital market line—a
set of portfolios obtainable by leveraging or deleveraging
positions in a "super-efficient" portfolio.
efficient frontier—a
set of portfolios that each maximize expected return for a given
level of risk.
efficient market
hypothesis A financial theory that markets are efficient in the sense that
prices reflect all available information.
portfolio theory—a body of
theory for how risk averse investors construct portfolios. |
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http://www.riskglossary.com
copyright © Glyn A. Holton,
1996
Although the information in
this website has been presented with care and obtained from sources the author believes to be reliable, there is no guarantee that it is
accurate. Such information may be incomplete, condensed, outdated or presented with
errors. The content of the website is for information purposes only. It is
provided gratuitously, so the author shall not be liable under any
theory for any damages suffered by any user. The author does not
provide investment advice, and this website is not a vehicle for communicating
investment advice. |
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