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diversification against the benefits in terms of the standard deviation of the returns. Suppose a safety first investor cares about …
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the benefits of portfolio diversification for downside risk in case returns are normally distributed with the case of fat …
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Consider the portfolio problem of choosing the mix between stocks and bonds under a downside risk constraint. Typically stock returns exhibit fatter tails than bonds corresponding to their greater downside risk. Downside risk criteria like the safety first criterion therefore often select corner...
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review this theory and subsequently study the problem of portfolio diversification in particular. We show that if the … portfolio diversification is more effective than if the underlying distribution would be normal. This is illustrated by a …
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