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Determining the Optimum Level of Diversification of Home Brokers Investors

Author

Listed:
  • Fernando Nascimento de Oliveira

    (Banco Central do Brasil e Ibmec/RJ)

  • Eduardo Lana de Paula

    (Light SA)

Abstract

This paper has the objective of determining the number of stocks that diversify a portfólio of Bovespa stocks of home brokers investors. We find the number of stocks that diversifies the portfólio by equalizing the benefit with the cost of including one more stock in the portfólio. To find the benefit, we use a methodology that is similar to Statman (1987). To find the cost we use an original methodology, in which we weight the costs of major brokers taking in consideration the volume transacted by them. The number of stocks that diversify our portfólio is 12.

Suggested Citation

  • Fernando Nascimento de Oliveira & Eduardo Lana de Paula, 2008. "Determining the Optimum Level of Diversification of Home Brokers Investors," Brazilian Review of Finance, Brazilian Society of Finance, vol. 6(3), pages 439-463.
    • Handle: RePEc:brf:journl:v:6:y:2008:i:3:p:439-463
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    More about this item

    Keywords

    portfólio; diversification; home brokers.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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