How to Quantify the Influence of Correlations on Investment Diversification
published: July 10, 2009, recorded: June 2009, views: 2570
Report a problem or upload filesIf you have found a problem with this lecture or would like to send us extra material, articles, exercises, etc., please use our ticket system to describe your request and upload the data.
Enter your e-mail into the 'Cc' field, and we will keep you updated with your request's status.
When assets are correlated, benefits of investment diversification are reduced. To measure the influence of correlations on investment performance, a new quantity - the effective portfolio size - is proposed and investigated in both artificial and real situations. We show that in most cases, the effective portfolio size is much smaller than the actual number of assets in the portfolio and that it lowers even further during financial crises.
Link this pageWould you like to put a link to this lecture on your homepage?
Go ahead! Copy the HTML snippet !