The study examines how intra-group transfers affect risk assessment in financial groups.
problem Determining the extent of intra-group transfers in assessing group solvency.
method Developed a framework to describe families of admissible intra-group transfers and constraints as random closed sets, focusing on solvency tests.
result Existence of acceptable selections of admissible transactions is key to solvency tests.
Investigates how diversification preferences relate to risk attitudes.
problem Connecting diversification preferences to risk attitudes.
method Analyzes diversification preferences for various pairs of risks under different conditions.
result Diversification preferences for certain pairs of risks imply specific levels of risk aversion.
Study examines diversification of mid-mountain ski tourism.
problem Understanding transformations in ski mid-mountain territories.
method Applied regional diversification theory to French ski areas.
result Identified three steps in tourism diversification paths.
Diversification increases systemic risk, contrary to belief.
problem Systemic risk due to diversification at banks.
method Examined diversification's impact on joint default probability and systemic risk using VaR.
result Diversification reduces individual and systemic risk, contrary to common belief.
The study provides foundations for naive diversification, a preference for equal treatment of alternatives.
problem Understanding and mathematically grounding naive diversification preferences.
method Axiomatization of naive diversification as a preference for equality over inequality, and derivation of its relationship to classical diversification.
result Naive diversification is a preference for equality over inequality, and it is characterized by convex and permutation invariant preferences.
The paper proposes a new approach to portfolio selection that maximizes diversification and return.
problem Maximizing diversification and return in portfolio selection.
method A bi-objective model that maximizes a diversification measure and portfolio expected return.
result The return-diversification approach outperforms strategies based on diversification or classical risk-return approaches.
New method diversifies risk using complex numbers.
problem Minimizing portfolio risk under constraints.
method Complex valued principal component analysis in risk diversification.
result Outperforms conventional risk parity and diversification methods.
A new diversification measure DQ derived from risk measures addresses limitations of existing indices.
problem Limitations of existing diversification indices in capturing tail heaviness and common shocks.
method DQs are defined based on a parametric family of risk measures, satisfying six axioms of diversification.
result DQs can properly capture tail heaviness and common shocks, improving portfolio selection.
Paper introduces lexical ratio to measure portfolio diversification.
problem Traditional diversification metrics overlook non-numerical relationships.
method Uses textual data to capture diversification dimensions through entropy-based insights.
result Lexical ratio (LR) outperforms traditional metrics in optimizing portfolio returns.
Study shows diversification potential in Australian stock market declined before and during financial crises.
problem Assessing diversification potential in a single market.
method Four methods, including PCA, applied to Australian stock exchange data.
result Diversification potential declined before and during financial crises.
Study on diversification of α-stable risks, revealing limits to diversification due to tail dependence.
problem Diversification of α-stable risks with tail dependence. method Analysis of aggregated Value-at-Risk under different tail dependence structures.
result Limits to diversification are violated, especially for low tail index values and positive dependence.
One of the findings of the recent literature is that the 2008 financial crisis caused reduction in international diversification benefits. To fully understand the possible potential from diversification, we build an empirical model which combines generalised autoregressive score copula functions with high frequency dat…
Coherent diversification of tech fields correlates with higher labor productivity.
problem Understanding how firms' technological diversification impacts productivity.
method Analyzed patent data of 70k firms over 2004-2013, defined coherent diversification as network of related tech fields.
result Firms with coherent diversification structure outperform those with scattered diversification in labor productivity.
Diversification improves profits for heavy-tailed investments.
problem Investment portfolios of Pareto-distributed returns.
method Stochastic dominance and majorization order.
result Diversification increases first-order stochastic dominance for heavy-tailed returns.
Investigates diversification quotient based on VaR and ES for portfolio models.
problem Quantifying diversification of portfolios using VaR and ES.
method Introduced and analyzed DQ based on VaR and ES for elliptical and MRV distributions.
result Explicit formulas and portfolio optimization problems for VaR and ES DQ are derived.
New framework optimizes portfolio diversification beyond mean-variance.
problem Optimizing portfolio diversification beyond classical methods.
method Introduces portfolio dimensionality, connects diversification to non-Gaussian returns, and develops global optimization algorithms.
result Maximizing portfolio dimensionality leads to highly non-trivial optimization problems with multiple local optima.
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von-Neumann-Morgenster…
This paper improves the Diversification Quotient (DQ) for better risk management.
problem Improving portfolio diversification measurement.
method Empirical estimation of DQ using VaR and ES, with asymptotic properties verified.
result Empirical DQ estimators are more robust and have better asymptotic properties.
The paper explores tail diversification in financial markets using entropy and mutual information.
problem Tail diversification in financial time series.
method Statistical independence through differential entropy and mutual information, using moments as contrast functions.
result Tail covariance matrix is a key driver of tail diversification.
Investment diversification affects financial stability, depending on network connectivity.
problem Analyzing stability of financial networks with diversified portfolios.
method Random matrix dynamical model with portfolio rebalancing, considering heterogeneity and diversification effects.
result Stability/instability transition depends on the largest eigenvalue of the random matrix.
Analysis shows diversification of risks isn't always better.
problem The effectiveness of diversification in risk management.
method Examined individual risk characteristics and dependence relationships.
result Diversification is not always superior to non-diversification.
Defines diversification as a binary relationship between financial portfolios.
problem Defines diversification in a new binary relationship for financial portfolios.
method Proposes a new definition of diversification based on convex linear combinations and second order stochastic dominance.
result The proposed definition coincides with second order stochastic dominance.
Investment diversification increased during the financial crisis, but similarity between funds remains a systemic risk.
problem Systemic risk in mutual fund investments during the financial crisis.
method Investigated the bipartite network of US mutual fund portfolios and their assets, analyzed their evolution during the crisis, and introduced a simplified model of financial shock propagation.
result Large overlap between mutual fund portfolios is more likely than expected, indicating strong correlations and systemic risk.
Analyzes re-ranking diversification algorithms based on function optimization.
problem Improving diversification in ranking systems.
method Examines re-ranking algorithms based on maximizing submodular/modular functions and their optimality in terms of total curvature.
result Adjusting hyperparameters can optimize relevance-diversity trade-offs.
Review of diversification models finds simple rules still best.
problem Testing new diversification models for out-of-sample performance.
method Tested sixteen strategies across six datasets.
result No new models consistently outperform simple diversification rules.
The paper addresses portfolio diversification under model uncertainty using robust dynamic mean-variance approach.
problem Model uncertainty in portfolio diversification and its effects on optimal strategies.
method Develops a continuous time framework for dynamic multi-asset mean-variance portfolio selection under model uncertainty, considering ambiguity aversion in expected return rates and correlation matrix.
result Proves a separation principle for robust control problem, reducing optimal dynamic strategy determination to minimal risk premium computation.
Oil is perceived as a good diversification tool for stock markets. To fully understand this potential, we propose a new empirical methodology that combines generalized autoregressive score copula functions with high frequency data and allows us to capture and forecast the conditional time-varying joint distribution of …
Diversification return is an incremental return earned by a rebalanced portfolio of assets. The diversification return of a rebalanced portfolio is often incorrectly ascribed to a reduction in variance. We argue that the underlying source of the diversification return is the rebalancing, which forces the investor to se…
Risk-only investment strategies have been growing in popularity as traditional in- vestment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that apparently dictinct risk-based …
A new portfolio method using quantum mechanics improves risk diversification.
problem Improving risk-based portfolio construction methods for multi-asset portfolios.
method Schrödinger principal component analysis applied to extract common factors from asset fluctuations.
result The proposed method outperforms conventional risk parity and other risk diversification methods.
The study revisits portfolio diversification by relaxing assumptions for skewed, multi-regime, and leptokurtic asset returns.
problem Underestimation of risk in portfolio diversification due to assumptions that are inconsistent with real-world asset returns.
method Calibrated a Markov-modulated Levy process model to equity market data to demonstrate the merits of the approach.
result The calibrated models effectively match empirical moments and show the importance of relaxing assumptions in portfolio diversification.
Study on diversifying equity portfolios during financial crises and stability.
problem Determining the effectiveness of diversification strategies during financial crises and stability.
method Analysis of 20 years of US stock price data, including GFC and COVID-19 crashes, using eigenvalues, graph-theoretic diagnostics, and hierarchical clustering.
result During financial crises, diversification via sector-based portfolios is ineffective, while during stability, 30-40 stocks provide sufficient diversification.
Investing in cryptocurrencies can improve portfolio risk-return profile, especially with diversification strategies.
problem Investing in cryptocurrencies and evaluating their potential for portfolio allocation strategies.
method Investigated different types of investors, various portfolio construction rules, and incorporated liquidity constraints.
result Cryptocurrencies can improve the risk-return profile of portfolios, especially with diversification strategies.
This paper revisits mean-variance portfolio theory, addressing limitations in diversification models.
problem Current diversification models assume exchangeable asset returns and ignore risk-free assets.
method Analyzes diversification under full information about asset returns and risk, considering both risky and risk-free assets.
result The conventional wisdom of mean-variance portfolio theory is not universally valid, especially when asset returns are not exchangeable.
Optimizes portfolios with utility theory, diversification, and leverage.
problem Finding optimal portfolio allocation strategies.
method Utility theory, exponential and logarithmic utilities, compound probability distributions, maximum expected utility, generalized mean-variance.
result Enhanced portfolio allocation strategies with natural explanations.
New methods show sparse portfolios offer no advantage over mean-variance in diversification.
problem Investment diversification and risk management with sparse portfolios.
method Developed and implemented a new estimation procedure for sparse second-order stochastic spanning using a greedy algorithm and Linear Programming.
result No benefit from expanding a sparse opportunity set beyond 45 assets; optimal sparse portfolio reduces tail risk.
Portfolio diversification and active risk management are essential parts of financial analysis which became even more crucial (and questioned) during and after the years of the Global Financial Crisis. We propose a novel approach to portfolio diversification using the information of searched items on Google Trends. The…
New study shows diversification can increase risk for heavy-tailed losses.
problem Diversification can increase tail risk for heavy-tailed losses.
method Comparison of diversified portfolio to a 'one-basket' benchmark.
result Diversified portfolio has larger tail probabilities than a 'one-basket' benchmark for all thresholds.
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the combined portfolio of assets and introduce a measure based on the information en…
Cryptocurrencies have heavy-tailed return distributions, requiring diversification.
problem Cryptocurrency returns do not follow Gaussian distributions.
method Applied econophysics and entropy measures to analyze returns.
result Portfolio diversification reduces return uncertainty.
Optimizes diversification in catastrophe risk pooling using asymptotic analysis.
problem Maximizing diversification benefit from catastrophic events in insurance pools.
method Asymptotic analysis to solve high-dimensional optimization problem.
result Derives an asymptotically optimal pool that approximates practical optimal pool.
This study uses Tsallis entropy to analyze diversification and integration in Italian stock market companies.
problem Examining the industrial structure and market reactions of cross-shareholding networks.
method Developed Tsallis entropy approach to model diversification and integration using copulas.
result Entropy analysis reveals insights into market polarisation and fairness.
New DQ based on expectiles improves portfolio diversification.
problem Improving diversification in financial portfolios.
method Diversification quotient based on expectiles, offering simple formulas and pseudo-convexity.
result The expectile-based DQ is efficient and effective in portfolio optimization.
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a quantifiable reduction of risk concentration a challenging task. In the present pap…
Optimizes portfolios by identifying causal drivers of diversification.
problem Achieving efficient portfolio optimization based on asset and diversification dynamics.
method Commonality Principle, Reichenbach Common Cause Principle, conformal maps, Bayesian networks, correlation-based algorithms, neural networks, SDEs.
result Optimal portfolio diversification achieved through causal methodologies and sensitivity forecasting.
Innovative framework for biotech investments using dynamic asset allocation and diversification.
problem Optimizing investment in growing biotech markets.
method Dynamic asset allocation and class diversification focusing on financial metrics and industry trends.
result Optimized investment framework for versatile application in specialized biotech markets.
We study the possibility of completing data bases of a sample of governance, diversification and value creation variables by providing a well adapted method to reconstruct the missing parts in order to obtain a complete sample to be applied for testing the ownership-structure/diversification relationship. It consists o…
This paper optimizes trading strategies with costs and diversification constraints.
problem Optimizing trading strategies with transaction costs and diversification constraints.
method Historical multi-stage optimal trading with graph generation and search.
result Developed methods for multi-variate multi-stage optimal trading under constraints.