IDEAS home Printed from https://ideas.repec.org/a/ods/journl/v6y2017i3p151-156.html
   My bibliography  Save this article

“Reverse-Engineering” the Market Portfolio

Author

Listed:
  • Mihir Dash

    (School of Business, Alliance University, India)

Abstract

The market portfolio plays a pivotal role in asset pricing. W. Sharpe proposed a model for the market portfolio based on optimizing the excess expected returns to total risk. Unfortunately, empirical studies using Sharpe's model in the CAPM explain asset expected returns only to a moderate extent. The present study proposes a model for the market portfolio which maximally explains expected returns of assets, under a given asset pricing model. This model is compared with five other constructions, viz. the equally-weighted portfolio, the value-weighted portfolio, the maximum returns portfolio, the minimum risk portfolio, and the Sharpe portfolio, in terms of their risk-return properties, the statistical properties of their implied SMLs, and their efficiency.

Suggested Citation

  • Mihir Dash, 2017. "“Reverse-Engineering” the Market Portfolio," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 6(3), pages 151-156, September.
    • Handle: RePEc:ods:journl:v:6:y:2017:i:3:p:151-156
    as

    Download full text from publisher

    File URL: http://www.jami.org.ua/Papers/JAMI_6_3_151-156.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roll, Richard, 1978. "Ambiguity when Performance is Measured by the Securities Market Line," Journal of Finance, American Finance Association, vol. 33(4), pages 1051-1069, September.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. Mihir Dash, 2014. "Granger Causality and the Capital Asset Pricing Model," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 3(2), pages 68-73.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bahodirzhan Bayhonov, 2017. "Economic Mathematic-Statistical Modelling of Investments Distribution in Uzbekistan," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 6(4), pages 217-222, November.
    2. Mihir Dash & Sadguna Kantheti & Guttula Krishna Teja, 2018. "The Book-to-Market Anomaly for Banking Stocks in the Indian Stock Market: A Panel Regression Analysis," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 7(1), pages 15-23, February.
    3. Mihir Dash, 2018. "Modelling the Efficient Frontier: An Empirical Study in the Indian Stock Market," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 7(2), pages 83-94, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Malavasi, Matteo & Ortobelli Lozza, Sergio & Trück, Stefan, 2021. "Second order of stochastic dominance efficiency vs mean variance efficiency," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1192-1206.
    2. Martin Gold, 2010. "Fiduciary Finance," Books, Edward Elgar Publishing, number 13813.
    3. Joro, Tarja & Na, Paul, 2006. "Portfolio performance evaluation in a mean-variance-skewness framework," European Journal of Operational Research, Elsevier, vol. 175(1), pages 446-461, November.
    4. repec:dau:papers:123456789/2256 is not listed on IDEAS
    5. Sanchez-Romero, Miguel, 2006. "“Demand for Private Annuities and Social Security: Consequences to Individual Wealth”," Working Papers in Economic Theory 2006/07, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    6. Hany Shawky & Ronald Forbes & Alan Frankle, 1983. "Liquidity Services and Capital Market Equilibrium: The Case for Money Market Mutual Funds," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 6(2), pages 141-152, June.
    7. Giovanni Bonaccolto & Massimiliano Caporin & Sandra Paterlini, 2018. "Asset allocation strategies based on penalized quantile regression," Computational Management Science, Springer, vol. 15(1), pages 1-32, January.
    8. Chris Kenyon & Andrew Green & Mourad Berrahoui, 2015. "Which measure for PFE? The Risk Appetite Measure, A," Papers 1512.06247, arXiv.org.
    9. Pirgaip, Burak & Arslan-Ayaydin, Özgür & Karan, Mehmet Baha, 2021. "Do Sukuk provide diversification benefits to conventional bond investors? Evidence from Turkey," Global Finance Journal, Elsevier, vol. 50(C).
    10. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Documentos de Trabajo del ICAE 2013-31, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
    11. Zhong, Angel, 2018. "Idiosyncratic volatility in the Australian equity market," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 105-125.
    12. Fuinhas, José Alberto & Marques, António Cardoso & Nogueira, David Coito, 2014. "Análise VAR dos índices bolsistas SP500, FTSE100, PSI20, HSI e IBOVESPA [Integration of the indexes SP500, FTSE100, PSI20, HSI and IBOVESPA: A VAR approach]," MPRA Paper 62092, University Library of Munich, Germany, revised 10 Feb 2015.
    13. Figge, Frank & Hahn, Tobias & Barkemeyer, Ralf, 2014. "The If, How and Where of assessing sustainable resource use," Ecological Economics, Elsevier, vol. 105(C), pages 274-283.
    14. Klaus Schredelseker, 2012. "Finanzkrise — Mitschuld der Theorie?," Schmalenbach Journal of Business Research, Springer, vol. 64(8), pages 833-845, December.
    15. Bao, Te & Diks, Cees & Li, Hao, 2018. "A generalized CAPM model with asymmetric power distributed errors with an application to portfolio construction," Economic Modelling, Elsevier, vol. 68(C), pages 611-621.
    16. Zied Ftiti & Aviral Tiwari & Amél Belanès & Khaled Guesmi, 2015. "Tests of Financial Market Contagion: Evolutionary Cospectral Analysis Versus Wavelet Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 46(4), pages 575-611, December.
    17. Hirschberger, Markus & Steuer, Ralph E. & Utz, Sebastian & Wimmer, Maximilian, 2012. "Is socially responsible investing just screening? Evidence from mutual funds," SFB 649 Discussion Papers 2012-025, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    18. Francesco Lautizi, 2015. "Large Scale Covariance Estimates for Portfolio Selection," CEIS Research Paper 353, Tor Vergata University, CEIS, revised 07 Aug 2015.
    19. Shen, Yang & Siu, Tak Kuen, 2012. "Asset allocation under stochastic interest rate with regime switching," Economic Modelling, Elsevier, vol. 29(4), pages 1126-1136.
    20. Li, Ziran & Sun, Jiajing & Wang, Shouyang, 2013. "Amplitude-Duration-Persistence Trade-off Relationship for Long Term Bear Stock Markets," MPRA Paper 54177, University Library of Munich, Germany.
    21. Taufiq Choudhry & Ranadeva Jayasekera, 2015. "Level of efficiency in the UK equity market: empirical study of the effects of the global financial crisis," Review of Quantitative Finance and Accounting, Springer, vol. 44(2), pages 213-242, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ods:journl:v:6:y:2017:i:3:p:151-156. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anatoliy G. Goncharuk (email available below). General contact details of provider: https://edirc.repec.org/data/dmonaua.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.