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Should Minimum Portfolio Sizes Be Prescribed for Achieving Sufficiently Well-Diversified Equity Portfolios?

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  • Lawrence Kryzanowski, Shishir Singh

    () (Concordia University, Quebec)

Abstract

This paper uses various (un)conditional metrics to measure the benefits of diversification to determine if a minimum portfolio size should be prescribed to achieve a naively but sufficiently well-diversified portfolio for various investment opportunity sets (un)differentiated by cross-listing status and market capitalization. Based on the population of stocks listed on the Toronto Stock Exchange (TSX) for 1975-2003, the study finds that the minimum portfolio size depends upon the chosen investment opportunity set, the metric(s) used to measure the benefits of diversification, and the criterion chosen to determine when the portfolio is sufficiently well diversified.

Suggested Citation

  • Lawrence Kryzanowski, Shishir Singh, 2010. "Should Minimum Portfolio Sizes Be Prescribed for Achieving Sufficiently Well-Diversified Equity Portfolios?," Frontiers in Finance and Economics, SKEMA Business School, vol. 7(2), pages 1-37, October.
  • Handle: RePEc:ffe:journl:v:7:y:2010:i:2:p:1-37
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    More about this item

    Keywords

    diversification benefits; portfolio size; dispersion; Sharpe and Sortino ratios.;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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