A theory stating it is impossible to create a fully
diversified portfolio and, therefore, the
capital asset pricing model (of which a diversified portfolio is an important part) cannot be completely accurate. According to Roll's critique, a diversified portfolio would include all
assets in the world. Thus, the CAPM uses a large
index, such as the S&P 500 or the
Wilshire 5000, as a proxy for the fully diversified portfolio.