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Intraportfolio Correlation: An Application for Investments Students

Business Education & Accreditation, v. 5 (1) p. 91-105

16 Pages Posted: 29 Jan 2013  

Lynda Livingston

University of Puget Sound - School of Business and Leadership

Date Written: 2013

Abstract

Intraportfolio correlation (IPC), a measure of portfolio diversification, is becoming increasingly popular among investment practitioners. However, despite the assertions of these adherents, IPC is far from a free lunch. Instead, it is a simplistic and flawed measure that ignores material information about the relationships among portfolio assets. Deconstructing the IPC therefore can be a productive and educational exercise (and a cautionary tale) for students of portfolio theory. In this paper, we describe IPC and offer suggestions for incorporating it into an introductory investments course.

Keywords: Portfolio Theory, Diversification, Finance Pedagogy

JEL Classification: G10, G11

Suggested Citation

Livingston, Lynda, Intraportfolio Correlation: An Application for Investments Students (2013). Business Education & Accreditation, v. 5 (1) p. 91-105. Available at SSRN: https://ssrn.com/abstract=2155136

Lynda Livingston (Contact Author)

University of Puget Sound - School of Business and Leadership ( email )

1500 N Warner St.
Tacoma, WA 98416
United States

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