Abstract:
Purpose - This paper aims to construct and compare various total-return world stock indices based
on daily data.
Design/methodology/approach - Because of diversification, these indices are noticeably similar.
A diversification theorem identifies any diversified portfolio as a proxy for the growth optimal
portfolio.
Findings - The paper constructs a diversified world stock index that outperforms a number of other
indices and argues that it is a good proxy for the growth optimal portfolio.
Originality/value - The diversified world stock index has applications to derivative pricing and
investment management.
