Which of the following statements is FALSE?
A)The S&P 500 and the Wilshire 5000 indexes are both well-diversified indexes that roughly correspond to the market of U.S.stocks.
B)Practitioners commonly use the S&P 500 as the market portfolio in the CAPM because they believe that this index is actually the market portfolio.
C)Standard & Poor's Depository Receipts (SPDR,nicknamed "spider")trade on the American Stock Exchange and represent ownership in the S&P 500.
D)The S&P 500 was the first widely publicized value weighted index and it has become a benchmark for professional investors.

Question

Quizplus · Accepted Answer

It is not accurate to say that practitioners use the S&P 500 as the market portfolio in the CAPM because they believe it is the actual market portfolio. The S&P 500 is used because it is a well-diversified index that represents a significant portion of the U.S. market, and thus serves as a reasonable proxy for the market portfolio. However, it is not a perfect representation of the entire market.

Which of the Following Statements Is FALSE