Abstract
The purpose of this paper is to construct a global minimum variance
portfolio (GMVP) using the log returns of the CARBS (Canada, Australia, Russia,
Brazil, South Africa) indices. The weights obtained indicate that most of the portfolio
should be invested in Canadian equity. The returns series of the CARBS and
the GMVP seem to be consistent with the stylised facts of financial time series. Further
empirical analysis shows that the CAPM relationship holds for Canada, South
Africa, and the GMVP. The systematic risk (b) of the GMVP is the lowest, and the
Russian equity index is the highest. However the R2 of all the models indicate that
the CAPM relationship is not a good fit for all the variables, and can therefore not
be considered a reliable measure of risk.