An analytic derivation of the efficient market portfolio

Zion Guo, Hsin Yi Huang

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

A market portfolio plays an important role in many financial theories and models. It is at the heart of the capital asset pricing model and other multivariate models. Because of the market portfolio cannot be observed directly, proxy portfolios must be used to conduct empirical studies. Unfortunately, many studies found these proxies to be inefficient and even removed from the efficient frontier. According to two-fund separation theorem, we take two steps to discover the efficient market portfolio. Our thinking is straightforward and proves that our market portfolio is not only an efficient portfolio but also is situated on the capital market line. Many researches have shown that the market portfolio is extremely sensitive to performance measurements. Hence, our findings may significantly influence financial research.

Original languageEnglish
Pages (from-to)104-116
Number of pages13
JournalRomanian Journal of Economic Forecasting
Volume15
Issue number4
Publication statusPublished - 2012 Dec 1

Fingerprint

Efficient markets
Market portfolio
Empirical study
Capital asset pricing model
Capital markets
Efficient portfolio
Separation theorem
Performance measurement
Mutual fund separation theorem
Multivariate models
Efficient frontier

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Cite this

@article{0ccb08679db34f29b3c6691ed18734e0,
title = "An analytic derivation of the efficient market portfolio",
abstract = "A market portfolio plays an important role in many financial theories and models. It is at the heart of the capital asset pricing model and other multivariate models. Because of the market portfolio cannot be observed directly, proxy portfolios must be used to conduct empirical studies. Unfortunately, many studies found these proxies to be inefficient and even removed from the efficient frontier. According to two-fund separation theorem, we take two steps to discover the efficient market portfolio. Our thinking is straightforward and proves that our market portfolio is not only an efficient portfolio but also is situated on the capital market line. Many researches have shown that the market portfolio is extremely sensitive to performance measurements. Hence, our findings may significantly influence financial research.",
author = "Zion Guo and Huang, {Hsin Yi}",
year = "2012",
month = "12",
day = "1",
language = "English",
volume = "15",
pages = "104--116",
journal = "Romanian Journal of Economic Forecasting",
issn = "1582-6163",
publisher = "Institute foe Economic Forecasting",
number = "4",

}

An analytic derivation of the efficient market portfolio. / Guo, Zion; Huang, Hsin Yi.

In: Romanian Journal of Economic Forecasting, Vol. 15, No. 4, 01.12.2012, p. 104-116.

Research output: Contribution to journalArticle

TY - JOUR

T1 - An analytic derivation of the efficient market portfolio

AU - Guo, Zion

AU - Huang, Hsin Yi

PY - 2012/12/1

Y1 - 2012/12/1

N2 - A market portfolio plays an important role in many financial theories and models. It is at the heart of the capital asset pricing model and other multivariate models. Because of the market portfolio cannot be observed directly, proxy portfolios must be used to conduct empirical studies. Unfortunately, many studies found these proxies to be inefficient and even removed from the efficient frontier. According to two-fund separation theorem, we take two steps to discover the efficient market portfolio. Our thinking is straightforward and proves that our market portfolio is not only an efficient portfolio but also is situated on the capital market line. Many researches have shown that the market portfolio is extremely sensitive to performance measurements. Hence, our findings may significantly influence financial research.

AB - A market portfolio plays an important role in many financial theories and models. It is at the heart of the capital asset pricing model and other multivariate models. Because of the market portfolio cannot be observed directly, proxy portfolios must be used to conduct empirical studies. Unfortunately, many studies found these proxies to be inefficient and even removed from the efficient frontier. According to two-fund separation theorem, we take two steps to discover the efficient market portfolio. Our thinking is straightforward and proves that our market portfolio is not only an efficient portfolio but also is situated on the capital market line. Many researches have shown that the market portfolio is extremely sensitive to performance measurements. Hence, our findings may significantly influence financial research.

UR - http://www.scopus.com/inward/record.url?scp=84873848022&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84873848022&partnerID=8YFLogxK

M3 - Article

VL - 15

SP - 104

EP - 116

JO - Romanian Journal of Economic Forecasting

JF - Romanian Journal of Economic Forecasting

SN - 1582-6163

IS - 4

ER -