Should Minimum Portfolio Sizes Be Prescribed for Achieving Sufficiently Well-Diversified Equity Portfolios?
Concordia University, Quebec - Department of Finance
affiliation not provided to SSRN
October 1, 2010
Frontiers in Finance and Economics, Vol. 7, No. 2, 1-37, October 2010
This paper uses various (un)conditional metrics to measure the benefits of diversification to determine if a minimum portfolio size should be prescribed to achieve a naively but sufficiently well-diversified portfolio for various investment opportunity sets (un)differentiated by cross-listing status and market capitalization. Based on the population of stocks listed on the Toronto Stock Exchange (TSX) for 1975-2003, the study finds that the minimum portfolio size depends upon the chosen investment opportunity set, the metric(s) used to measure the benefits of diversification, and the criterion chosen to determine when the portfolio is sufficiently well diversified.
Number of Pages in PDF File: 37
Keywords: diversification benefits, portfolio size, dispersion, Sharpe and Sortino ratios
JEL Classification: G11, G23, C15, D81
Date posted: December 17, 2010
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