Open Access Repository

How many stocks are enough for diversifying Canadian institutional portfolios?

Alexeev, V and Tapon, F 2014 , How many stocks are enough for diversifying Canadian institutional portfolios?.

2014-08_Alexeev...pdf | Download (1MB)
Available under University of Tasmania Standard License.


Portfolio risk is a function of the number of stocks held in portfolios. We simulate portfolios using daily observations for all traded and delisted equities in Canada from 1975 to 2011 and we calculate several measures of risk, including heavy-tailed to account for black swan events. For each risk measure, we calculate the average number of portfolio holdings and the upper limits of these holdings to assure investors of a specific reduction in diversifiable risk. In contrast to previous literature that suggests 10-15 stocks are enough to provide adequate diversification for an average investor, we find that in fact more than 50 stocks are needed to achieve the same level of diversification most of the time instead of on average.

Item Type: Report (Discussion Paper)
Authors/Creators:Alexeev, V and Tapon, F
Keywords: Portfolio diversification; heavy tailed risk, expected shortfall; time series standard deviation; terminal wealth standard deviation; Canadian equities; institutional investors; repec
Publisher: University of Tasmania
Item Statistics: View statistics for this item

Actions (login required)

Item Control Page Item Control Page