TY - JOUR T1 - Why Track Inefficiency? JF - The Journal of Index Investing SP - 28 LP - 36 DO - 10.3905/jii.2011.2.3.028 VL - 2 IS - 3 AU - Brian Boscaljon AU - Greg Filbeck AU - Xin Zhao Y1 - 2011/11/30 UR - https://pm-research.com/content/2/3/28.abstract N2 - Benchmarks play an important role in assessing performance as a part of the investment process. Modern portfolio theory suggests that the benchmark of the true market portfolio on the efficient frontier is unknown. However, the S&P 500 Index is often used as a proxy for the U.S. domestic equity market portfolio. In this study, the authors examine the efficiency of the S&P 500.The results imply that more efficient subsets of the S&P 500 are easily constructed by randomly selecting stocks across industry sectors within the S&P 500. The implications of the study suggest portfolios consisting of fewer stocks equally weighted across industries are more efficient than the S&P 500 Index.TOPICS: Portfolio theory, equity portfolio management, portfolio construction ER -