A Comparative Research of Average Risk of Portfolio on Different Strategies and Risk Diversification

Abstract

Abstract: Four investment strategies according to investor’s preference are designed to choose portfolios to compare their average risk in Chinese stock market. Improved indirect disaggregated model is used to study components of risk to compare diversification effect .The empirical results indicate that average risks of portfolios which use different investment strategies are distinctly different. Compared with choosing stock from the whole market, the average risk of portfolios choosing stock from the big Blue Chip stocks is less. Portfolios of 30 stocks almost have deleted all idiosyncratic risk for strategy 3 and strategy 4. But the evidence is not enough to show that covariance risks are deleted.

Key words: investment strategy, portfolio, average risk, components

CLC Number:

F830

CHEN Jian-1, 2 , HU Wen-Wei-3, LI Zhan-1. A Comparative Research of Average Risk of Portfolio on Different Strategies and Risk Diversification[J]. Journal of Shanghai Jiaotong University, 2011, 45(12): 1824-1828.

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A Comparative Research of Average Risk of Portfolio on Different Strategies and Risk Diversification

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