اقدامات جایگزین "پرتفوی بازار جهانی": عوامل، بازده، محتوا و اطلاعات

The world market portfolio plays an important role in international asset pricing, but is unobservable in practice. We first propose a framework for constructing a market proxy that corresponds to the “market portfolio” of financial theory. We then construct this proxy, analyze its determinants and test its efficiency and explanatory power over the period 1975–2007 with respect to the return generating processes of a broad asset universe. We show that its major determinants are traded assets and that it is not efficient. However, it is significant for explaining individual asset returns over an asset universe that includes stocks, bonds, money markets and commodities. The explanatory information is incremental to what is available in traded asset prices and the significance of this information is robust with respect to diversified portfolios generated by factor analysis and to characteristic-sorted portfolios as well as to various model specifications, including the single-index model, the Fama–French (1992) three factor model for stocks, and various specifications of multi-index models hedged and unhedged for foreign currency risk.

The “market portfolio” figures prominently in modern asset pricing.2 Many, if not most, theoretical pricing models include the market portfolio as an explanatory variable.3 By definition, the market portfolio is supposed to comprise all assets in the economy, both traded and non-traded, including human capital and capital owned by the government. The problem that we address and provide a solution for in this paper is that the “market portfolio” cannot be observed directly, thereby making it necessary to use proxy portfolios when conducting empirical studies. The problem is important for theory and practice. Empirical validation of the theoretical models, such as the CAPM (capital asset pricing model) or the Fama–French 3-factor model, depends crucially on the index or indices chosen to proxy for the true market portfolio.4 In practice, the proxy portfolio is important for asset evaluation and portfolio construction on the one hand and for performance measurement on the other, because performance measurement is extremely sensitive to the choice of the market proxy as shown in many studies, such as Roll, 1978 and Dybvig and Ross, 1985 and Green (1986). The most popular proxy for the market portfolio is typically a general stock market index. For example, many US studies use the CRSP equal weighted or value weighted index and most international studies use the MSCI global index (e.g. Vassalou, 2000). There are, however, many problems with indices such as these. First of all, they represent only one asset class and are typically inefficient. Shanken (1987), for example, shows that using the equally weighted CRSP index (alone, or together with a long-term US government bond portfolio) as the market portfolio, either invalidates the CAPM or the proxy is inefficient. Fama and French (1998) find that the MSCI global index is inefficient with respect to the value and growth portfolios they form. Secondly, irrespective of whether the proxy used is efficient or not, using a proxy market portfolio which consists of the individual assets used in the tests makes it likely that their returns will be correlated with the proxy used. In other words, the results will be tautological. To overcome this, some researchers exclude from the proxy they use the returns of the assets included in their tests. However, Fama and French (1998) have argued that while this may avoid inducing a spurious relation between assets’ returns and the proxy, it can corrupt the estimates of the risk loading in the tests employed. Attempts to improve the proxy quality follow two general routes. Some studies, such as Mayers (1972) and Stambaugh (1982), who used several definitions of the market portfolio, including corporate bonds, government bonds, Treasury bills, home furnishings, residential real estate, automobiles, and common stocks, have attempted to augment the market proxy with other marketable assets and/or non-marketable assets in order to include a bigger proportion of the economy’s value. Others use a traditional proxy and add explanatory variables. For example, Jagannathan and Wang (1996) include a measure of human capital and Vassalou (2003) uses GDP forecast revisions as an additional risk factor.5 Neither method overcomes the fact that a large part of the economy’s value is excluded and both are vulnerable to the tautology weakness. In this paper we take a completely different route to construct the “market portfolio”. We build on the intuition that if the “market portfolio” of financial theory represents the value of all the assets in the economy, it, in fact, represents the total value of the economy. Thus, rather than adding up values of individual assets to determine a proxy for the national “market portfolio”, we use the Hicks (1987) model of discounted macroeconomic cash flows to calculate the value of the economy directly. In this way, all assets are represented in the country “market portfolio”, but since no individual assets enter the portfolio directly, we avoid the tautology problem. We construct the international market proxy, which we call the world market portfolio (WMP), as the sum of the ninety national market portfolios in our sample. We then analyze this portfolio and test its empirical relevance for explaining the return generating process on individual assets and portfolios of assets. We do not, however, aim to test any particular asset-pricing model. This paper contributes to the literature on international macro asset pricing. It proposes a completely new proxy for the world market portfolio and shows that it has significant explanatory power for the return generating process of portfolios of a wide range of assets that include stock indexes, medium- and long-term government bonds, money markets and commodity and real estate indexes, including diversified portfolios generated by principal components analysis and by characteristic-sorting à la Fama and French. It is important to bear in mind that the paper does not attempt to construct an international asset-pricing model. The proxy developed in this paper can be used in any international asset pricing model that uses a proxy for the “international market portfolio”, such as the international single-beta CAPM, the Adler and Dumas (1983) CAPM with foreign exchange risk, the international Fama–French multifactor model (1998), etc.6 To reflect this, the empirical analysis uses a wide range of model specifications to test the explanatory power of the world market proxy developed in this paper. We present strong evidence that the proxy is not efficient but that it does provide significant, incremental information for explaining asset returns that is contained neither in the other explanatory variables nor in the returns of the traded assets in our sample. The rest of the paper is organized as follows. Section 2 develops the theoretical and practical construction of the world market portfolio. Section 3 presents the data, methodology and empirical analysis. Section 4 summarizes and concludes.

In this paper, we build on the intuition that the “market portfolio” of financial theory represents the total value of a national economy to construct and test a portfolio that corresponds to the “market portfolio” of financial theory. Thus, rather than adding up values of individual assets to determine a proxy for the national “market portfolio”, we use the Hicks (1987) framework of discounted macroeconomic cash flows to calculate the value of the economy directly. In this way, we avoid the shortcomings of the popular proxy indices currently in use that generally exclude many asset classes and are vulnerable to the tautology weakness. All assets are represented in the country “market portfolios” we construct and since no individual assets enter the portfolio directly, we also avoid the tautology weakness. Our international market portfolio proxy, the WMP, is calculated as the sum of the ninety national market portfolios in our sample. Its dynamics depend on the growth rates, volatilities and correlations of the exchange rates and the local currency values of the individual economies. We find that the major determinants of the world market portfolio excess returns are the excess returns of assets that are traded publicly on international and local markets. We present strong evidence that the world market portfolio has significant explanatory power for the return generating process of portfolios of a wide range of assets that include stock indices, medium and long-term government bonds, money markets and commodity and real estate indices, including well diversified portfolios generated by principal components analysis. It also has significant explanatory power for most of the individual assets across all the asset classes. We provide strong evidence based on individual asset betas, the Gibbons et al. (1989)F-test, and marginal conditional stochastic dominance, that the index is not efficient. We show that the index provides significant incremental information on the return generating process of a wide range of assets that is not contained in the prices of assets that are traded publicly on international and local markets. This incremental information retains its significance as a complement in the Fama–French (1992) model. We have shown that the explanatory information of the WMP is robust with respect to characteristic-sorted portfolios as well as to various model specifications, including the single-index model, the Fama–French (1992) three factor model for stocks, and various specifications of multi-index models hedged and unhedged for foreign currency risk. The shortcoming of the WMP is that due to data constraints, it is difficult to construct on less than a quarterly time scale. Further research includes generating the world market portfolio on a more frequent basis, extending the tests to include more countries and asset classes, and testing its out-of-sample predictive power.