Publications
Type of Publication: Article in Journal
How should individual investors diversify? An empirical evaluation of alternative asset allocation policies
- Author(s):
- Jacobs, Heiko; Müller, Sebastian; Weber, Martin
- Title of Journal:
- Journal of Financial Markets
- Volume (Publication Date):
- 2014 (2014)
- Number of Issue:
- 19
- pages:
- 62-85
- Keywords:
- Portfolio theory Household finance Asset allocation International diversification Heuristics
- Digital Object Identifier (DOI):
- doi:10.1016/j.finmar.2013.07.004
- Link to complete version:
- https://www.sciencedirect.com/science/article/pii/S1386418113000451
Abstract
Abstract
This paper evaluates numerous diversification strategies as a possible remedy against widespread costly investment mistakes of individual investors. Our results reveal that a very broad range of simple heuristic allocation schemes offers similar diversification gains as well-established or recently developed portfolio optimization approaches. This holds true for both international diversification in the stock market and diversification over different asset classes. We thus suggest easy-to-implement allocation guidelines for individual investors.