In so far as the concept of systematic risk is predicated on the Sharpe-Lintner theory of capital market equilibrium [5, 4], the time-horizon of systematic risk must conform with the time-horizon of market equilibrium. Since it has been suggested that market equilibrium is instantaneous [3, p. 188], it would follow that systematic risk should also be instantaneous. This paper is, therefore, concerned with the evaluation and measurement of instantaneous risk. Although Jensen [3] has made a similar attempt in a much larger study, we have reason to believe it is not satisfactory. We shall then begin in Section I by discussing Jensen's approach to the horizon problem. In Section II, an alternative procedure of evaluating systematic risk is suggested. Section III concludes the paper by comparing estimates of instantaneous risks based upon weekly returns of 30 Dow-Jones stocks. The motivation behind the paper is obvious. A correct formulation of instantaneous systematic risk is not only a logical extension of the capital market equilibrium theory but is also a yardstick for measuring portfolio performance in terms of risk and return.

The advent of the computer has permitted financial theorists to collect and analyze large amounts of financial data. In the field of investments some of the most important work has focused on historical rates of return in investments in common stocks. The classical study in this area is the Fisher-Lorie study [8, 9] in which intern al rates of return were calculated for every security listed on the New York Stock Exchange from 1926–1965. Other studies related to the area have been complicated by Herzog [10], Fisher [6, 7], Latané and Young [11], Soldofsky and Biderman [12], and Evans [3, 4].