Portal de Periódicos da CAPES

Equity Portfolio Diversification*

2008; Oxford University Press; Volume: 12; Issue: 3 Linguagem: Inglês

10.1093/rof/rfn005

1573-692X

William N. Goetzmann, Alok Kumar,

Financial Literacy, Pension, Retirement Analysis

This study shows that U.S. individual investors hold under-diversified portfolios, where the level of under-diversification is greater among younger, low-income, less-educated, and less-sophisticated investors. The level of under-diversification is also correlated with investment choices that are consistent with over-confidence, trend-following behavior, and local bias. Furthermore, investors who over-weight stocks with higher volatility and higher skewness are less diversified. In contrast, there is little evidence that portfolio size or transaction costs constrains diversification. Under-diversification is costly to most investors, but a small subset of investors under-diversify because of superior information.