Correlation of Return on Investment Portfolios and Equity Market Stability

Victor A. Gorelik () and Tatyana V. Zolotova ()
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Victor A. Gorelik: The State University of the Ministry of Finance of the Russia
Tatyana V. Zolotova: The State University of the Ministry of Finance of the Russia

Finansovyj žhurnal — Financial Journal, 2012, issue 3, 43-52

Abstract: The article presents assessment of the collective risk on the equity market as a measure of variability of the investment portfolios. It proves that uniform behavior of investors, i.e. portfolio optimization per Markowitz (with regard to different risks), results in positive correlation of the return of their portfolios, which may cause significant volatility of the market. An approach to market stability assessment is proposed.

Keywords: individual risk; collective risk; correlation; market entropy; stability measure (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:120304:p:43-52

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