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The Impact of Portfolio Diversification on Trading Rules Profits: Some Evidence for UK Share Portfolios


  • Patricia L. Chelley-Steeley

    (Cardiff Business School)

  • James M. Steeley

    (Cardiff Business School)


This paper demonstrates how the autocorrelation structure of UK portfolio returns is linked to dynamic interrelationships among the component securities of that portfolio. Moreover, portfolio return autocorrelation is shown to be an increasing function of the number of securities in the portfolio. Since the security interrelationships seemed to be more a product of their history of non-synchronous trading than of systematic industry-related phenomena, it should not be possible to exploit the high levels of return persistence using trading rules. We show that rules designed to exploit this portfolio autocorrelation structure do not produce economic profits. Copyright Blackwell Publishers Ltd 1997.

Suggested Citation

  • Patricia L. Chelley-Steeley & James M. Steeley, 1997. "The Impact of Portfolio Diversification on Trading Rules Profits: Some Evidence for UK Share Portfolios," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 759-779.
  • Handle: RePEc:bla:jbfnac:v:24:y:1997-07:i:6:p:759-779

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    Cited by:

    1. Gunasekarage, Abeyratna & Power, David M., 2001. "The profitability of moving average trading rules in South Asian stock markets," Emerging Markets Review, Elsevier, vol. 2(1), pages 17-33, March.

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