Abstract

http://ssrn.com/abstract=2182295
 
 

References (4)



 
 

Footnotes (14)



 


 



Equity Portfolio Diversification: How Many Stocks are Enough? Evidence from Five Developed Markets


Vitali V. Alexeev


University of Tasmania, School of Economics and Finance

Francis Tapon


University of Guelph - Department of Economics

November 28, 2012

FIRN Research Paper

Abstract:     
Choosing the number of stocks to hold in a portfolio can significantly affect its risk. We use daily observations for traded equity returns in the US, UK, Japan, Canada and Australia from 1975 to 2011 to simulate portfolios and calculate several measures of risk, including heavy tailed. For each measure, we estimate confidence bands to assure a specific reduction in diversifiable risk. The optimal number of stocks is shown to depend on the measure of risk, level of assurance required by investors, the specific stock market, and the changing correlation structure across time.

Number of Pages in PDF File: 38

Keywords: portfolio diversification, international investing, heavy tailed risk, expected shortfall, time series standard deviation, terminal wealth standard deviation

JEL Classification: G11, C15


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Date posted: November 29, 2012  

Suggested Citation

Alexeev, Vitali V. and Tapon, Francis, Equity Portfolio Diversification: How Many Stocks are Enough? Evidence from Five Developed Markets (November 28, 2012). FIRN Research Paper. Available at SSRN: http://ssrn.com/abstract=2182295 or http://dx.doi.org/10.2139/ssrn.2182295

Contact Information

Vitali V. Alexeev (Contact Author)
University of Tasmania, School of Economics and Finance ( email )
Private Bag 85
Sandy Bay
Hobart, Tasmania 7001
Australia
+61 3 6226 2335 (Phone)
+61 3 6226 7587 (Fax)
HOME PAGE: http://valexeev.yolasite.com/
Francis Tapon
University of Guelph - Department of Economics ( email )
50 Stone Road East
Guelph, Ontario N1G 2W1
Canada
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