Diversification 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

Papathanakos, Vassilios, Diversification Potential (June 9, 2020). Available at SSRN: https://ssrn.com/abstract=3622775 or http://dx.doi.org/10.2139/ssrn.3622775

Vassilios Papathanakos (Contact Author)

INTECH Investment Management, LLC ( email )

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