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    Impending Doom: The Loss of Diversification before a Crisis (2017)

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    ijfs-05-00029.pdf (328.8Kb)
    Type of Content
    Journal Article
    UC Permalink
    http://hdl.handle.net/10092/15165
    
    ISSN
    2227-7072
    Collections
    • Business: Journal Articles [255]
    Authors
    Rea WS
    Yang L
    Rea A
    show all
    Abstract

    We present four methods of assessing the diversification potential within a stock market, and two of these are based on principal component analysis. They were applied to the Australian stock exchange for the years 2000 to 2014 and all show a consistent picture. The potential for diversification declined almost monotonically in the three years prior to the 2008 financial crisis, leaving investors poorly diversified at the onset of the Global Financial Crisis. On one of the four measures, the diversification potential declined even further in the 2011 European debt crisis and the American credit downgrade.

    Citation
    Yang L, Rea WS, Rea A (2017). Impending Doom: The Loss of Diversification before a Crisis. International Journal of Financial Studies. 5(29).
    This citation is automatically generated and may be unreliable. Use as a guide only.
    Keywords
    principal component analysis; stock selection; diversification; stock portfolios; ASX200
    ANZSRC Fields of Research
    35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350203 - Financial econometrics
    38 - Economics::3801 - Applied economics::380107 - Financial economics
    35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
    Rights
    Creative Commons Attribution License 4.0

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