Article thumbnail

Investor preferences and portfolio selection: is diversification an appropriate strategy?

By C. James Hueng and Ruey Yau


This paper analyzes the relationship between diversification and several distributional characteristics that have risk implications for stock returns. We develop a flexible three-parameter distribution to model the stock returns. Using data on the current 30 DJIA stocks, we show that an investor's strategy on diversification depends on the measures of risk for particular concerns. For example, investors who desire to increase positive skewness would hold a less diversified portfolio, while those who care more about extreme losses would hold a more diversified portfolio. Experimenting with a more general pool of stocks yields the same conclusions.Diversification, Asymmetric Generalized t distribution, Skewness,

DOI identifier: 10.1080/14697680600680134
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • (external link)

  • To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

    Suggested articles