Market Portfolio:
A market portfolio refers to a kind of portfolio that comprises of several risky investments, with each individual investment in portfolio weighted in proportion to its value. Such portfolios consist of all outstanding shares of all the risky securities.
A market portfolio can also be referred to as a theoretical bundle of investments comprising of all the assets available in the financial market. The expected return of a market portfolio is same as the expected return of a market as a whole.
The market portfolios for the stocks are value-weighted portfolios as each individual security is held in proportion to its market capitalization.
To determine:
The trade necessary to keep the portfolio value weighted.
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