The significance of the market portfolio
Authors: Shiller R.1; Athanasoulis S.
Source: Review of Financial Studies, Volume 13, Number 2, 2000 , pp. 301-329(29)
Publisher: Oxford University Press
- The Review of Financial Studies is a major forum for the promotion and wide dissemination of significant new research in financial economics. As reflected by its broadly based editorial board, the Review balances theoretical and empirical contributions. The primary criteria for publishing a paper are its quality and importance to the field of finance, without undue regard to its technical difficulty. Finance is interpreted broadly to include the interface between finance and economics. The Review is sponsored by The Society for Financial Studies. The editors of the Review and officers of the Society are elected for limited terms.
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Abstract:
Arguments for creating a market to allow trading the portfolio of all endowments in the entire world, the 'market portfolio', are considered. This world share market would represent a radical innovation, since at the present time only a small fraction of world endowments are traded. Using a stochastic endowment economy where preference are mean variance, it is shown that creating such a market may be justified in terms of its contribution to social welfare. It is also argued that creating a market for world shares is attractive for certain reasons of robustness and simplicity.
Document Type: Original article
Affiliations: Cowles Foundation, Yale University, 30 Hillhouse Avenue, New Haven, CT 06511, USA : 1: Corresponding author
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