Download This PaperDiversification Potential
25 Pages Posted: 1 Jul 2020
Date Written: June 9, 2020
Abstract
In these working notes, we introduce the concept of the diversification potential, which expresses the maximum diversification premium available by rebalancing to fixed target weights for a collection of assets. We distinguish between two forms of diversification potential: the unconstrained (which allows portfolios with short positions) and the constrained (which only permits long-only portfolios).
Keywords: portfolio management; diversification; stochastic portfolio theory; excess growth rate
JEL Classification: G11, G23
Suggested Citation: Suggested Citation
Papathanakos, Vassilios, Diversification Potential (June 9, 2020). Available at SSRN: https://ssrn.com/abstract=3622775 or http://dx.doi.org/10.2139/ssrn.3622775
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