Which is the ‘right’ choice of the market portfolio of the CAPM?

A plethora of research exists on the Capital Asset Pricing Model and how to tackle the unobservability of the true market portfolio. We contribute to this debate by providing an overview of commonly used proxies for the market portfolio embedded into a critical evaluation of these proxies. In particular, we evaluate equal- and value-weighted equity market proxies, a multi-asset approach, and a macroeconomic method. Since all proxies have strengths and weaknesses, we propose doing a case-by-case evaluation to reconcile the underlying goal of the analysis with the choice of the appropriate market proxy.