PalacioHill

I think "Market Portfolio" when talking about portfolio theory is the optimal portfolio. Given completely efficient markets etc (in equilibrium...), the weights of the market portfolio should equal the optimal portfolio. i.e. all investors should want to hold the optimal portfolio (buying and selling until they get there) which means that it is now the market portfolio.

I just dont think of the "market portfolio" when talking about the CML as the true market portfolio at any specific point in time. More of a theoretical portfolio. With that said, if we were given the weights etc of a portfolio on the test that was said to be the "market portfolio", I would assume that the theory holds and that it was the optimal portfolio.


Just a guess. Sort of confused myself at the end there.