How should individual investors diversify? An empirical evaluation of alternative asset allocation policies

Heiko Jacobs, Sebastian Müller and Martin Weber

Journal of Financial Markets, 2014, vol. 19, issue C, 62-85

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.

Keywords: Portfolio theory; Household finance; Asset allocation; International diversification; Heuristics (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:19:y:2014:i:c:p:62-85

DOI: 10.1016/j.finmar.2013.07.004

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