▁risk . ▁Cas ino ▁g amb lers ▁pay ▁to ▁take ▁on ▁more ▁risk , ▁and ▁it ▁is ▁possible ▁that ▁some ▁stock ▁trad ers ▁will ▁pay ▁for ▁risk ▁as ▁well . ▁ ▁The ▁model ▁assumes ▁that ▁there ▁are ▁no ▁tax es ▁or ▁transaction ▁costs , ▁although ▁this ▁assumption ▁may ▁be ▁relax ed ▁with ▁more ▁complicated ▁versions ▁of ▁the ▁model . ▁ ▁The ▁market ▁port folio ▁consists ▁of ▁all ▁assets ▁in ▁all ▁mark ets , ▁where ▁each ▁asset ▁is ▁weight ed ▁by ▁its ▁market ▁capital ization . ▁ ▁This ▁assumes ▁no ▁preference ▁between ▁mark ets ▁and ▁assets ▁for ▁individual ▁active ▁and ▁potential ▁share hold ers , ▁and ▁that ▁active ▁and ▁potential ▁share hold ers ▁choose ▁assets ▁sole ly ▁as ▁a ▁function ▁of ▁their ▁risk - return ▁profile . ▁ ▁It ▁also ▁assumes ▁that ▁all ▁assets ▁are ▁infinitely ▁divis ible ▁as ▁to ▁the ▁amount ▁which ▁may ▁be ▁held ▁or ▁trans act ed . ▁ ▁The ▁market ▁port folio ▁should ▁in ▁theory ▁include ▁all ▁types ▁of ▁assets ▁that ▁are ▁held ▁by ▁anyone ▁as ▁an ▁invest ment ▁( including ▁works ▁of ▁art , ▁real ▁estate , ▁human ▁capital ...) ▁In ▁practice , ▁such ▁a ▁market ▁port folio ▁is ▁un ob servable ▁and ▁people ▁usually ▁substitute ▁a ▁stock ▁index ▁as ▁a ▁proxy ▁for ▁the ▁true ▁market ▁port folio . ▁Unfortunately , ▁it ▁has ▁been ▁shown ▁that ▁this ▁substitution ▁is ▁not ▁innoc uous ▁and ▁can ▁lead ▁to ▁false ▁infer ences ▁as ▁to ▁the ▁valid ity ▁of ▁the ▁C AP M , ▁and ▁it ▁has ▁been ▁said ▁that ▁due ▁to ▁the