Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the correlations, more precise betas.

I want to use the right benchmark for all this.

Many holdings are diversified internationally, but not completely, esp. not into emerging markets (over 1999-2007). Is it appealing to use an MSCI all-world benchmark (viz. MSCI ACWI IMI GR USD converted into SEK) as people "should" have diversified, so all extra risk is, well, extra? Or it makes much more sense to compare everything to an MSCI World ( developed markets only) benchmark?

Full disclosure: This breaks down my longer question into specifics. Please bear with me. From: annual excess returns from CAPM on monthly total returns

share|improve this question

Did the portfolio manager have the option of investing in emerging markets? If yes, use MSCI All-World. If the portfolio has holdings based in countries with "developed markets" yet has has emerging markets exposure to revenue/earnings, the convention is to use MSCI World.

share|improve this answer

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.