Using the S&P 500 portfolio as a proxy of the market portfolio
A) is appropriate because U.S. securities represent more than 60% of world equities.
B) is appropriate because most U.S. investors are primarily interested in U.S. securities.
C) is appropriate because most U.S. and non-U.S. investors are primarily interested in U.S. securities.
D) is inappropriate because U.S. securities make up less than 41% of world equities.
E) is inappropriate because the average U.S. investor has less than 20% of his or her portfolio in non-U.S. equities.

Question

Quizplus · Accepted Answer

Using the S&P 500 as a proxy for the market portfolio is inappropriate because it does not fully represent the global equity market. U.S. securities constitute less than 41% of global equities, making the S&P 500 too narrow in scope to represent the entire market portfolio accurately.

Using the S&P 500 Portfolio as a Proxy of the Market