The significance of the market portfolio

Arguments for creating a marker to allow trading the portfolio of all endowments in the entire world, the "market portfolio " are considered. This world share market would represent a radical innovation, since at the present time only a small fraction of world endowments are traded. Using a stochastic endowment economy where preferences are mean variance, it is shown that creating such a market may be justified in terms of its contribution to social welfare. It is also argued that creating a market for world shares is attractive for certain reasons of robustness and simplicity.