Market Proxy

AAA

DEFINITION of 'Market Proxy'

A broad representation of the overall market. A market proxy is chosen and used to simplify studies that require a market variable, statistic or comparison. The market proxy, once selected, is then used in performance evaluations and studies, or to test a hypothesis.

INVESTOPEDIA EXPLAINS 'Market Proxy'

Finding a true proxy (or reflection) of the market as a whole may not be possible, because a proxy will only be a fragment of the entire market for all risky assets. As well, every proxy for the market would need to be unique, according to what is being traded or measured. For example, the S&P 500 could be used as a market proxy when evaluating the excess returns of a fund manager only using stock from the S&P 500. A different proxy would be needed, however, to assess a manager trading in futures or using fixed-income arbitrage.

RELATED TERMS
  1. Dow Jones Industrial Average - ...

    The Dow Jones Industrial Average is a price-weighted average ...
  2. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  3. Alpha Generator

    Any security that, when added to an existing portfolio of assets, ...
  4. Capital Asset Pricing Model - CAPM

    A model that describes the relationship between risk and expected ...
  5. Alpha

    1. A measure of performance on a risk-adjusted basis. Alpha takes ...
  6. Excess Returns

    Investment returns from a security or portfolio that exceed a ...
Related Articles
  1. Beta: Know The Risk
    Investing Basics

    Beta: Know The Risk

  2. Adding Alpha Without Adding Risk
    Options & Futures

    Adding Alpha Without Adding Risk

  3. Strategies For Determining The Market's ...
    Mutual Funds & ETFs

    Strategies For Determining The Market's ...

  4. The Capital Asset Pricing Model: An ...
    Fundamental Analysis

    The Capital Asset Pricing Model: An ...

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center