Publications

Type of Publication: Article in Journal

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

Author(s):
Heiko Jacobs; Sebastian Müller; Martin Weber
Title of Journal:
Journal of Financial Markets
Volume:
2014
Number of Issue:
19
pages:
62-85
Keywords:
Portfolio theory Household finance Asset allocation International diversification Heuristics
Digital Object Identifier (DOI):
doi:10.1016/j.finmar.2013.07.004
Link to complete version:
https://www.sciencedirect.com/science/article/pii/S1386418113000451
Citation:
LABEL-FOR-eidrisexport

Abstract

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.