Toward An Improved Portfolio Variance Measure Of Regional Economic Stability

Paul B. Siegel, Jeffrey Alwang and Thomas G. Johnson
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Paul B. Siegel: University of Tennessee, Knoxville
Thomas G. Johnson: Virginia Tech

The Review of Regional Studies, 1994, vol. 24, issue 1, 71-86

Abstract: The portfolio variance has gained popularity as a tool to evaluate alternative strategies that promote regional economic stability. As it is commonly applied, however, the portfolio variance has several problems that limit its appropriateness for regional economic analysis. There are several implicit assumptions about the relationship between structural change and stability, and about the emphasis on aggregate region-wide stability that should be recognized when using the portfolio variance approach to predict the impact of alternative diversification strategies. These assumptions and their implications are discussed, and an improved portfolio variance measure of regional economic stability is presented.

Date: 1994
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