Bridge over ocean
1 July 1998 Financial Analysts Journal Volume 54, Issue 4

Naive Diversification

  1. Dirk P.M. De Wit

Some diversifiable risk is always left in a portfolio. The argument here is that the excess risk in a randomly selected portfolio of a given size should be compensated for. The analysis shows that the required excess return of an imperfectly diversified portfolio depends on just two parameters: the equity risk premium and the average correlation between stock returns.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.