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What Australian Investors need to know to diversify their portfolios


Alexeev, V and Tapon, F, What Australian Investors need to know to diversify their portfolios, JASSA, (4) pp. 14-20. ISSN 0313-5934 (2013) [Refereed Article]

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An ASIC survey in 2008 showed that Australian investors do not diversify their portfolios sufficiently, with the average investor holding only 2.19 securities. To study this issue, we simulate portfolios using daily observations for all traded and delisted equities in Australia between 1975 and 2011. We calculate two measures of risk, including heavy tailed distributions to account for extreme events. For each risk measure, we recommend the number of portfolio holdings that result in a 90 per cent reduction in diversifiable risk for an average and a more conservative investor. We find that on average, 24 to 30 stocks are sufficient to attain a well-diversified portfolio.

Item Details

Item Type:Refereed Article
Research Division:Commerce, Management, Tourism and Services
Research Group:Banking, finance and investment
Research Field:Investment and risk management
Objective Division:Commercial Services and Tourism
Objective Group:Financial services
Objective Field:Investment services (excl. superannuation)
UTAS Author:Alexeev, V (Dr Vitali Alexeev)
ID Code:88759
Year Published:2013
Deposited By:Economics and Finance
Deposited On:2014-02-14
Last Modified:2014-11-04

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