Market Portfolio

Purpose

The market portfolio acts as the reasonable prior referenced by the Estimator for several historic data adjustment methods, can be used to calculate forecast contrasts, and can be used to derive a benchmark return series.

Weighting

Depending on what the market portfolio will be used for, you may want to equal weight the market portfolio, enter capitalization weights, or weight the assets according to another criterion.  By default, the Estimator sets an equal weighted market portfolio.  

If you enter a specific weight for an asset, that weight shows on a white background.  The Estimator automatically equal weights the remaining assets in the portfolio, which show on a blue background, and leaves those you entered alone.  For you adjust the asset universe frequently, this removes the need to adjust the market portfolio every time as long as you’re content to have all or part of your market portfolio equally weighted.

Mechanics

• The market portfolio appears on the Historical Worksheet.
• If you delete your market portfolio, an equal weighted portfolio will appear.
• Loading an NFA portfolio file (*.nfp), provided that the assets match, will fill in the market portfolio.  
• Changing the asset universe may necessitate changes to the market portfolio and to any contrasts that rely on the market portfolio depending on how you have set up the case.

• The market portfolio appears on the Results Worksheet to facilitate review of inputs and results on one page.