Ten Stocks are Enough in Asia

33 Pages Posted: 1 Jul 2014 Last revised: 5 Aug 2014

See all articles by Andrew Stotz

Andrew Stotz

University of Science and Technology of China (USTC), School of Management, Students ; Thammasat University - Thammasat Business School

Wei Lu

University of Science and Technology of China (USTC) - School of Management

Date Written: July 17, 2014

Abstract

This paper looks across 13,000 stocks in Asia excluding Japan over 10 years to determine the optimum number an active manager should hold to reduce unsystematic risk. We randomly select stocks for inclusion in equally weighted portfolios that are held for one year and then are reselected based on the new year’s universe. We find that 10 stocks removed 64% of unsystematic risk and, after this, the marginal impact reduces significantly. An additional 10 stocks will only take this number to 74%, but will drive the active fund’s performance closer to that of a passive fund.

Keywords: porfolio selection, porfolio size, finance, Asia, Asian markets, portfolio theory

Suggested Citation

Stotz, Andrew and Stotz, Andrew and Lu, Wei, Ten Stocks are Enough in Asia (July 17, 2014). Available at SSRN: https://ssrn.com/abstract=2461115 or http://dx.doi.org/10.2139/ssrn.2461115

Andrew Stotz (Contact Author)

University of Science and Technology of China (USTC), School of Management, Students ( email )

China

Thammasat University - Thammasat Business School ( email )

2 Prachan Road
Pra Nakorn
Bangkok, Bangkok 10200
Thailand

Wei Lu

University of Science and Technology of China (USTC) - School of Management

China

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