Journal article

How to quantify the influence of correlations on investment diversification

  • Medo, Matúš Department of Physics, The Hong Kong University of Science and Technology, Hong Kong, China
  • Yeung, Chi Ho Department of Physics, The Hong Kong University of Science and Technology, Hong Kong, China - Lab of Information Economy and Internet Research, University of Electronic Science and Technology of China, Chengdu, China
  • Zhang, Yi-Cheng Physics Department, University of Fribourg, Switzerland - Lab of Information Economy and Internet Research, University of Electronic Science and Technology of China, Chengdu, China
    04.02.2009
Published in:
  • International Review of Financial Analysis. - 2009, vol. 18, no. 1-2, p. 34-39
English 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.
Faculty
Faculté des sciences
Department
Physique
Language
  • English
Classification
Economics
License
License undefined
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/301291
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