. so c - ph ] 1 1 Ja n 20 08 How many independent bets are there in an emerging market ?
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چکیده
The benefits of portfolio diversification is a central tenet implicit to modern financial theory and practice. Linked to diversification is the notion of breadth. Breadth is correctly thought of as the number of independent bets available to an investor. Conventionally applications using breadth frequently assume only the number of separate bets. There may be a large discrepancy between these two interpretations. We utilize a simple singular-value decomposition (SVD) and the Keiser-Gutman stopping criterion to select the integer-valued effective dimensionality of the correlation matrix of returns. In an emerging market such as South African we document an estimated breadth that is considerably lower than anticipated. This lack of diversification may be because of market concentration, exposure to the global commodity cycle and local currency volatility. We discuss some practical extensions to a more statistically correct interpretation of market breadth, and its theoretical implications for both global and domestic investors.
منابع مشابه
How Many Independent Bets Are There?
We discuss a robust alternative to the ex-post decomposition of a portfolio into the fundamental law co-efficients using statistically estimated breadth. The breadth of a market provides a measure of the number of independent bets available to the investor. We use the Keiser-Gutman stopping criterion to select the integer valued effective dimension eigenvalues greater-than or equal to 1. Such a...
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تاریخ انتشار 2008