Behavioral Diversification
Up until now, we have generally accepted that diversification means allocating a portion of our investments into sectors in which we believe will maximize our probability to outperform the market, while minimizing our unsystematic risk. This paper takes on the pioneering simulation of creating and structuring a portfolio that is diversified on the four types of consumer products: convenience goods, shopping goods, specialty goods, and unsought goods. What if it was more important to focus on allocation in implementing a more consumer-behavior approach to structuring a well-diversified portfolio? This paper implements a linear regression model and Monte Carlo Simulation of a Portfolio Simulation. Each financial security selected the portfolio "leads" with their #1 product type. For example, Coca-Cola (KO) will lead as a "convenience good". The portfolio simulation will "run" between the years of Jan 2000 to July 2023, a 22.5-year span. In addition, there will be another portfolio simulation of applying both Modern Portfolio Theory, followed by a combined Modern Portfolio Theory with Behavioral Diversification. My hypothesis is that behavioral diversification will outperform the market but will have to endure periods of "unfair" unsystematic risk. The portfolio is behaviorally diversified but is heavily weighted in one sector
Year of publication: |
[2023]
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Authors: | Blumeyer, Michael V. |
Publisher: |
[S.l.] : SSRN |
Subject: | Portfolio-Management | Portfolio selection | Anlageverhalten | Behavioural finance | Diversifikation | Diversification | Verhaltensökonomik | Behavioral economics |
Description of contents: | Abstract [papers.ssrn.com] |
Saved in:
Extent: | 1 Online-Ressource |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 4, 2023 erstellt Volltext nicht verfügbar |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014349308
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