File(s) under permanent embargo
What Australian Investors need to know to diversify their portfolios
journal contribution
posted on 2023-05-17, 22:02 authored by Alexeev, V, Tapon, FAn 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.
History
Publication title
JASSAIssue
4Pagination
14-20ISSN
0313-5934Department/School
TSBEPublisher
Financial Services Institute of Australasia (FinsiaPlace of publication
AustraliaRights statement
Copyright 2013 FinsiaRepository Status
- Restricted