The Case for Diversification…

October 2000
Journal of Financial Planning;Oct2000, Vol. 13 Issue 10, p20
Academic Journal
This article provides information on a working paper on the firm-, market-, and industry-level variances for the U.S. National Bureau of Economic Research. The four authors calculated the variances using daily data from July 1962 to December 1997. They found that volatility increased at the individual firm level, but not at the market and industry levels. Because the market-level volatility remained roughly the same, this contrast in volatility-level change implies a decrease in correlation among stocks. They also believe this implies that the benefits of portfolio diversification have increased over time.


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