from the market portfolio. One alternative asset class that has become very popular with institutional investors recently is hedge funds. Although very interesting and a great portfolio di-versifier, there is little doubt that hedge funds should not be included in the market portfolio. Hedge funds utilize strategies that capitalize on opportunistic trading positions and benefit from market inefficiencies. Just like mutual funds, hedge funds do not create new assets. Thus, if we were to include hedge funds, we would be double counting and inflating the value of the market portfolio. Two other asset classes that need to be considered for inclusion in the market portfolio are commodities and natural resources. One may safely assert that a large portion of wealth is attributable to commodities and natural resources. However, just like hedge funds, if we were to include all commodities and raw materials in the market portfolio, we would be double counting. For instance, a good portion of the Goldman Sachs Commodities index consists of oil. However, some of this oil is already accounted for in the total market capitalization of such petroleum firms as BP Amoco, Chevron, and others. On the other hand, much oil is owned by governments and is not part of the public equity markets. We think a good argument can be made that oil is a very significant resource that is underweighted in the usual definitions of the market portfolio. Although some of the asset classes discussed in this section may indeed be part of the true theoretical market portfolio, it may not be necessary to include them all in one while testing or implementing the CAPM. Stambaugh (1982) tested this exact hypothesis and showed that CAPM results are not sensitive to the choice of the market portfolio. Thus, an approximation of the market portfolio that includes all publicly traded assets may very well suffice for both testing and implementing the CAPM.