Equity portfolio diversification
Version 2 2024-06-06, 11:17
Version 1 2017-03-31, 13:28
journal contribution
posted on 2008-01-01, 00:00 authored by W N Goetzmann, A KumarThis study shows that U.S. individual investors hold under-diversified portfolios, where the level of under-diversification is greater among younger, low-income, less-educated, and less-sophisticated investors. The level of under-diversification is also correlated with investment choices that are consistent with over-confidence, trend-following behavior, and local bias. Furthermore, investors who over-weight stocks with higher volatility and higher skewness are less diversified. In contrast, there is little evidence that portfolio size or transaction costs constrains diversification. Under-diversification is costly to most investors, but a small subset of investors under-diversify because of superior information.
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Journal
Review of financeVolume
12Pagination
433 - 463Publisher
Oxford University PressLocation
Oxford, Eng.Publisher DOI
ISSN
1572-3097eISSN
1573-692XLanguage
engPublication classification
C1.1 Refereed article in a scholarly journalCopyright notice
2008, The AuthorUsage metrics
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