Portfolios - EDHEC-Risk
Portfolios - EDHEC-Risk
Portfolios - EDHEC-Risk
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Efficiency is Related to Diversification<br />
• In any case, it is not clear why investors would care about their<br />
portfolios representing the economy; from the investor’s<br />
perspective, the focus should be on efficiency: obtaining fair<br />
rewards for given risk budgets.<br />
• Efficiency is intimately related to diversification: it is by<br />
constructing ti well-diversified ifi d portfolios thatt one can achieve a<br />
fair reward for a given risk exposure.<br />
• CW portfolios appear to be rather inefficient and poorly<br />
diversified portfolios, and several approaches have been<br />
developed so as to improve diversification compared to CW.<br />
• Some benchmark construction approaches simply avoid this<br />
concentration without aiming for “optimality”; other approaches<br />
are grounded d in portfolio theory.<br />
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