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Can portfolio diversification increase systemic risk? evidence from the U.S and European mutual funds market

  • Dicembrino, Claudio
  • Scandizzo, Pasquale Lucio

This paper tests the hypothesis that portfolio diversification can increase the threat of systemic financial risk. The paper provides first a theoretical rationale for the possibility that systemic risk may be increased by the proliferation of financial instruments that lead operators to hold increasingly similar portfolios. Secondly, the paper tests the hypothesis that diversification may result in increasing systematic risk, by analyzing the portfolio dynamics of some of the major world open funds.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33715.

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Date of creation: 30 Nov 2011
Date of revision:
Handle: RePEc:pra:mprapa:33715
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  15. Wagner, Wolf, 2010. "Diversification at financial institutions and systemic crises," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 373-386, July.
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  19. Lehar, Alfred, 2005. "Measuring systemic risk: A risk management approach," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2577-2603, October.
  20. Grossman, Richard S., 1994. "The Shoe That Didn't Drop: Explaining Banking Stability During the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 54(03), pages 654-682, September.
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  25. Christian Capuano, 2008. "The Option-iPoD," IMF Working Papers 08/194, International Monetary Fund.
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