Is diversification always optimal?

Humphrey, Jacquelyn E., Benson, Karen L., Low, Rand K.Y. and Lee, Wei-Lun (2015) Is diversification always optimal?. Pacific Basin Finance Journal, 35 Part B: 521-532. doi:10.1016/j.pacfin.2015.09.003

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Author Humphrey, Jacquelyn E.
Benson, Karen L.
Low, Rand K.Y.
Lee, Wei-Lun
Title Is diversification always optimal?
Journal name Pacific Basin Finance Journal   Check publisher's open access policy
ISSN 0927-538X
Publication date 2015-11-01
Year available 2015
Sub-type Article (original research)
DOI 10.1016/j.pacfin.2015.09.003
Open Access Status Not yet assessed
Volume 35
Issue Part B
Start page 521
End page 532
Total pages 12
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Abstract Finance theory and recent literature suggest that investors should diversify their retirement savings across a number of funds. However, the Australian government encourages investors to consolidate retirement savings into just one fund. Using a number of optimization techniques, we investigate which of these two actions would result in the best outcome for investors in terms of risk and return. We find that in the majority of cases investors would be better off not diversifying their holdings; mainly because superannuation funds cannot be short sold. Consolidation therefore does appear to be the optimal strategy for the average superannuation investor.
Keyword Retirement funds
Superannuation
Diversification
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
 
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