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The number of stocks in your portfolio should be larger than you think: diversification evidence from five developed markets
Citation
Alexeev, V and Tapon, F, The number of stocks in your portfolio should be larger than you think: diversification evidence from five developed markets, The Journal of Investment Strategies, 4, (1) pp. 43-82. ISSN 2047-1238 (2014) [Refereed Article]
Copyright Statement
Copyright 2014 Incisive Risk Information
Official URL: http://www.risk.net/journal-of-investment-strategi...
DOI: doi:10.21314/JOIS.2015.037
Abstract
In this study of five developed markets, we analyze the sizes of portfolios required
to achieve the most diversification benefits. We compute several widely accepted
measures of risk and use an extreme risk measure to account for black swan
events. In addition to providing portfolio size recommendations for an average
investor, we estimate confidence bands around central measures of risk and offer
recommendations for attaining the most diversification benefits 90% of the time,
instead of on average. In contrast to previous literature that suggests between
10 and 15 stocks are enough to provide adequate diversification for an average
investor, we find that in fact more than 73 stocks are needed to achieve the same
level of diversification most of the time, instead of on average.
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: | 96838 |
| Year Published: | 2014 |
| Deposited By: | TSBE |
| Deposited On: | 2014-11-24 |
| Last Modified: | 2015-04-24 |
| Downloads: | 2 View Download Statistics |
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