Portfolio optimisation and diversification

David King ()
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David King: Investment Risk Group, Schroder Investment Management

Journal of Asset Management, 2007, vol. 8, issue 5, No 3, 296-307

Abstract: Abstract Portfolio optimisation can produce overly concentrated portfolios that both practitioners and clients may find difficult to accept. This paper shows, through adjustments to the objective function, how to alter levels of portfolio diversification using the same quadratic programming methodology used in the standard portfolio optimisation process. The ideas can be extended to target differential levels of diversification at multiple levels of asset categorisation and can thus be used in a variety of settings.

Keywords: portfolio optimisation; diversification; quadratic programming (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1057/palgrave.jam.2250082

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