Microsoft PowerPoint - PoF.ppt

Properties of portfolios: diversificationƒ 30

Naive diversification:

portfolio with n assets, each asset

with weight 1/nExample (2 years of recent weekly data): naive portfolios of Austrian stocks
Single-period random cash flows: Mean-variance portfolio theory

Boehler Lenzing Mayr MK Erste

EVN

Return

#

SD

100.00

0.033

1

0.219

50.00

50.00

0.106

2

0.145

33.33

33.33

33.33

0.117

3

0.145

25.00

25.00

25.00

25.00

0.153

4

0.135

20.00

20.00

20.00

20.00

20.00

0.140

5

0.121