How Many Stocks Make a Diversified Portfolio?
We show that a well-diversified portfolio of randomly chosen stocks must include at least 30 stocks for a borrowing investor and 40 stocks for a lending investor. This contradicts the widely accepted notion that the benefits of diversification are virtually exhausted when a portfolio contains approximately 10 stocks. We also contrast our result with the levels of diversification found in studies of individuals' portfolios.
Volume (Year): 22 (1987)
Issue (Month): 03 (September)
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References listed on IDEAS
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