A Simple Diversified Portfolio Strategy

Posted: 15 Nov 2014 Last revised: 3 Jan 2017

See all articles by Bernd Hanke

Bernd Hanke

Global Systematic Investors LLP

Garrett Quigley

Global Systematic Investors LLP

Multiple version iconThere are 2 versions of this paper

Date Written: November 13, 2014

Abstract

We present a simple portfolio construction approach which is a blend of market weights and equal stock and sector weights. Our approach results in a highly diversified portfolio both on a stock level and on a sector level and generates higher portfolio returns at slightly lower risk than a market weighted index. We demonstrate that the higher returns of our diversified portfolio originate both from mitigating the link with market weights and from its higher return benefit due to diversification which we are able to capture because we rebalance our portfolio on a regular basis. Our diversified portfolio is highly implementable and has very high investment capacity.

Keywords: diversification, diversification premium, equity

JEL Classification: G00

Suggested Citation

Hanke, Bernd and Quigley, Garrett, A Simple Diversified Portfolio Strategy (November 13, 2014). Available at SSRN: https://ssrn.com/abstract=2524132

Bernd Hanke (Contact Author)

Global Systematic Investors LLP ( email )

45 King William Street
1st Floor
London, EC4R 9AN
United Kingdom

HOME PAGE: http://www.gsillp.com

Garrett Quigley

Global Systematic Investors LLP ( email )

75 King William Street
London, EC4N 7BE
United Kingdom

HOME PAGE: http://www.gsillp.com

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