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

Citation:

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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.