In practice,the market portfolio is often represented by:
A) a portfolio of U.S. Treasury securities.
B) a diversified stock market index.
C) an investor's mutual fund portfolio.
D) the historic record of stock market returns.

Question

Quizplus · Accepted Answer

The market portfolio represents the aggregate of all assets or securities in the market. Therefore, it is best represented by a diversified stock market index such as the S&P 500 or the Wilshire 5000. The other options do not provide a comprehensive representation of the entire market portfolio. A portfolio of U.S. Treasury securities would only represent a specific asset class, an investor's mutual fund portfolio would only represent an individual's holdings and not the entire market, and the historic record of stock market returns would not reflect the current composition of the market portfolio.

In Practice,the Market Portfolio Is Often Represented By