TY - JOUR

T1 - Which is the ‘right’ choice of the market portfolio of the CAPM?

AU - Wobst, Janice

AU - Gramlich, Alexandra

AU - Röttger, Philipp

AU - Spee, Kolja

PY - 2020/3/31

Y1 - 2020/3/31

N2 - A plethora of research exists on the Capital Asset Pricing Model and how to tackle the unobservability of the true market portfolio. We contribute to this debate by providing an overview of commonly used proxies for the market portfolio embedded into a critical evaluation of these proxies. In particular, we evaluate equal- and value-weighted equity market proxies, a multi-asset approach, and a macroeconomic method. Since all proxies have strengths and weaknesses, we propose doing a case-by-case evaluation to reconcile the underlying goal of the analysis with the choice of the appropriate market proxy.

AB - A plethora of research exists on the Capital Asset Pricing Model and how to tackle the unobservability of the true market portfolio. We contribute to this debate by providing an overview of commonly used proxies for the market portfolio embedded into a critical evaluation of these proxies. In particular, we evaluate equal- and value-weighted equity market proxies, a multi-asset approach, and a macroeconomic method. Since all proxies have strengths and weaknesses, we propose doing a case-by-case evaluation to reconcile the underlying goal of the analysis with the choice of the appropriate market proxy.

KW - Management studies

KW - Capital asset priceing model

KW - market portfolio

KW - market proxy

KW - asset pricing

M3 - Journal articles

VL - 10

SP - 25

EP - 29

JO - Management Studies

JF - Management Studies

SN - 2699-1187

IS - 1

ER -