Diversification

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Revision as of 16:11, 26 July 2019 by Nisiprius (talk | contribs) (The cited source explicitly calls this "Markowitz diversification," not just "diversification.")
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Within the framework of modern portfolio theory (MPT), the term Markowitz diversification can mean

combining securities with less-than-perfect positive correlation in order to reduce risk in the portfolio without sacrificing any of the portfolio’s expected return.[1]

This approach to diversification was introduced by Harry M. Markowitz in his ground-breaking 1952 paper, Portfolio Selection.[2]

The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.[3]

References

  1. Francis, Jack Clark; Kim, Dongcheol (213). "Modern Portfolio Theory". "John Wiley & Sons, Inc.". p. 120. ISBN 9781118417201.
  2. Markowitz, H.M. (March 1952). "Portfolio Selection". pp. 77–91. Unknown parameter |publication= ignored (help)
  3. Diversification Definition | Investopedia. Retrieved January 7, 2017.

Further reading

External links