Paper Spotlight: Historical Returns of the Market Portfolio

Ronald Doeswijk

Trevin Lam

Laurens Swinkels







The market portfolio plays a special role in asset pricing. Although many finance researchers use a U.S. equity portfolio to proxy for the market portfolio, theory usually dictates a broad, world portfolio that includes global equities, global real estate, commodities, and fixed income. In a new Review of Asset Pricing Studies paper, “Historical Returns of the Market Portfolio,” Ronald Doeswijk, Trevin Lam, and Laurens Swinkels introduce the best proxy for the global market portfolio to date. Since 1960, this portfolio has delivered a realized annual compound return (in U.S. dollars) of 4.45%.  Their index and its components may be downloaded for free.

Spotlight by Jeffrey Pontiff
Photos courtesy of Ronald Doeswijk, Trevin Lam, and Laurens Swinkels

Paper Spotlight: Do Proxies for Informed Trading Measure Informed Trading? Evidence from Illegal Insider Trades

Kenneth Ahern

Reliable proxies for informed trading are required to test many theories in finance. Theory suggests several possible proxies; however, validating these empirically has been challenging because trades by informed investors cannot (in general) be observed. Kenneth Ahern’s new paper, “Do Proxies for Informed Trading Measure Informed Trading? Evidence from Illegal Insider Trades,” addresses this challenge by using hand-collected data on illegal insider trades. He shows that the effective bid-ask spread and the absolute order imbalance are robust predictors of informed trading (illegal insider trading) while other measures are not because of strategic timing of their trades by insiders and sampling bias.

Spotlight by Thierry Foucault
Photo courtesy of Kenneth Ahern

Statement of the SFS Council

The Society of Financial Studies Council believes that we cannot remain silent about the continued acts of racism that exist in our society. We acknowledge the numerous voices of the peaceful protesters and are determined to not let this moment pass without contributing to a changed society. In particular, the future of a robust financial system lies on the path of justice and equity. We are actively investigating ways to participate.

Editorial Team Updates

Dimitri Vayanos and Clemens Sialm have been renewed for 3-year terms as associate editors. We thank Pietro Veronesi, who is retiring as an associate editor.

Winners of the RAPS Awards

The winners of the annual RAPS Awards were announced at the virtual Awards Reception on May 26 as part of the Cavalcade. We are pleased to share the winners:

Best Paper Award
“A Fresh Look at Return Predictability Using a More Efficient Estimator”
Travis Johnson
Prize: $10,000

Referee of the Year
Svetlana Bryzgalova
Prize: $1000

Rising Scholar Award
“Quantitative Easing and Equity Prices: Evidence from the ETF Program of the Bank of Japan”
Andrea Barbon and Virginia Gianinazzi
Prize: $5000

Congratulations to all our award winners!