22.05% Corporate Credi. 17.33% Local Authority 0.46% Local Agency 1.03% Supranational 1.75% Sovereign 1.41% Treasuries 45.87% Agencies 9.43% FIGURE 8.3 Lehman Global Aggregate Index CONSTRUCTING THE MARKET PORTFOLIO_________________ As mentioned earlier, due to prevailing globalization the market portfolio today should at least contain global equities and global bonds. As shown in Figure 8.4, the equity/bond split of the market portfolio has varied substantially throughout the years. In the past decade, the equity portion of the portfolio hit a minimum of 47 percent in October 1992 and a maximum of 63 percent in March 2000. However, would a combination of these two asset classes suffice as a market portfolio? Currently, an average investor holds about 30 percent of his or her wealth in real estate. How would one replicate this portfolio and represent it in an aggregate state? The very fact that the market portfolio is indeed intangible and cannot be easily estimated served as the main premise of Richard Roll's paper published in 1977.5 In his argument, also known as Roll's critique, Roll suggests that it is nearly impossible to empirically test the CAPM. Indeed, the linear relationship between 5See Roll, Richard, 1977, "A Critique of the Asset Pricing Theory's Tests; Part I: On Past and Potential Testability of the Theory," Journal of Financial Economics 4, 129-176.