Unifying Portfolio Diversification Measures Using Rao's Quadratic Entropy

CRREP Working Paper 2015-02

63 Pages Posted: 26 May 2015 Last revised: 15 Mar 2022

See all articles by Benoit Carmichael

Benoit Carmichael

Université Laval

Gilles Boevi Koumou

Université Mohammed VI Polytechnique

Kevin Moran

Laval University - Department of Economics

Date Written: March 15, 2022

Abstract

This paper extends the use of Rao's Quadratic Entropy (RQE) to portfolio theory. We provide both theoretical and empirical evidence that RQE is a valid, flexible and unifying approach for managing and quantifying the benefit of portfolio correlation diversification.

Keywords: Rao's Quadratic Entropy, Portfolio Diversification, Correlation Diversification, Quadratic Utility Theory

JEL Classification: C1, C4, D81, G1, G11

Suggested Citation

Carmichael, Benoit and Koumou, Gilles and Moran, Kevin, Unifying Portfolio Diversification Measures Using Rao's Quadratic Entropy (March 15, 2022). CRREP Working Paper 2015-02, Available at SSRN: https://ssrn.com/abstract=2610814 or http://dx.doi.org/10.2139/ssrn.2610814

Benoit Carmichael

Université Laval ( email )

Quebec G1K 7P4
Canada

Gilles Koumou

Université Mohammed VI Polytechnique ( email )

Rabat
Morocco

Kevin Moran (Contact Author)

Laval University - Department of Economics ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

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