Notes On The Value Of Diversification - 1352 Words

The value of diversification Introduction Every finance students have learnt diversification is to reduce total risk by investing a basket of assets in portfolios. But what contributes to the success of portfolio diversification? A large number of assets? A variety types of asset allocation? Adding international investment? Numerous of risk factors? They are all indicators of a well-diversified portfolio. In this case, we will discuss about the advantages and disadvantages of diversification in portfolio management with related indicators. On one hand, some mention dynamic and numerous assets allocation in the portfolio will reduce both risks. While some also state the benefit of introduce multi-factor portfolio pricing models. On the other hand, arguments arise demonstrating adding international investment may disappoint investors because foreign market could be correlated and moved together. Another disadvantage could be the correlated assets collected weaken the effect of diversification. At the end, a balanced conclusion will be drawn to support the useful diversification. Dynamic and numerous asset allocation benefits Since there are two types of risk we need to account for: systematic risk and idiosyncratic risk, the easiest one to be diversified away is the idiosyncratic risk. It is known that an optimal portfolio could gain on diversification by investing a large basket of stocks. This is a good way to offset firm-specific risk. According to Bodie, Kane and MarcusShow MoreRelatedNotes On The Value Of Diversification1497 Words   |  6 PagesThe value of diversification Introduction Diversification is worth more than a word. It works on reducing the total risk of a portfolio with different asset types. But what contributes to the success of portfolio diversification? A large size of portfolio? A variety types of asset allocation? Adding international investment? Numerous of risk factors? They are all indicators of a well-diversified portfolio. But it is hard to achieve a perfectly diversified portfolio in reality because you cannot diversifyRead MoreRelationship Between Corporate Diversification And Csp1297 Words   |  6 Pagesresearch aim which wants to examine the relationship between corporate diversification and CSP, this study uses multiple regression analysis with one year lag model as the data analysis tool. The regression equations are as follows: CSP_i2013 =ã€â€" ÃŽ ²Ã£â‚¬â€"_1 ã€â€"total diversificationã€â€"_i2012+∑_(i=1)^nââ€"’ã€â€"ã€â€"ÃŽ ²_i Controlã€â€"_i2012+ÃŽ µ_i ã€â€" (1) CSP_i2013 =ã€â€" ÃŽ ²Ã£â‚¬â€"_1 ã€â€"related diversificationã€â€"_i2012+ÃŽ ²_2 ã€â€"unrelated diversificationã€â€"_i2012+ ∑_(i=1)^nââ€"’ã€â€"ÃŽ ²_i Controlã€â€"_i2012 +ÃŽ µ_iRead MoreAnalysis of Sabmiller1347 Words   |  6 PagesANALYSIS OF SABMiller’s DIVERSIFICATION AND COMPETITIVE STRATEGIES INTRODUCTION SABMiller PLC is a global giant in the brewery industry and has a track record of innovation and growth. Being one of the world’s biggest brands, SABMiller has adopted a unique style to ensure competitive advantage and remain at the forefront of the brewing world. Key to its developing and maintenance of relevance are its values and strategic priorities Values include: Recognition of people being an enduring advantageRead MoreManaging Investment Growth Of A Diversified Portfolio1499 Words   |  6 Pagesreturn requirements. Even though some investments may present greater risk they are countered by a higher rate of return and vice versa, less risk corresponds to a lower return. Moreover, investment risk can be substantially reduced through diversification, which spreads a portfolio across different industries, businesses and investment options. The makeup of a diversified portfolio continually changes based on an investor’s time horizon and investment goals. In accordance with the Modern PortfolioRead MoreThe Walt Disney Company: the Entertainment King Essay1589 Words   |  7 PagesMaximilian Scheufler Strategic Management The Walt Disney Company: The Entertainment King[1] I. Why has Disney been successful for so long? Disney’s long-run success is mainly due to creating value through diversification. Their corporate strategies (primarily under CEO Eisner) include three dimensions: horizontal and geographic expansion as well as vertical integration. Disney is a prime example of how to achieve long-run success through the choices of business, the choice of how manyRead More Exploring Walt Disney Company: The Entertainment King Essay1514 Words   |  7 PagesStrategic Management The Walt Disney Company: The Entertainment King[1] I. Why has Disney been successful for so long? Disney’s long-run success is mainly due to creating value through diversification. Their corporate strategies (primarily under CEO Eisner) include three dimensions: horizontal and geographic expansion as well as vertical integration. Disney is a prime example of how to achieve long-run success through the choices of business, the choice of how many activities to undertakeRead MoreRisk Reduction by Diversification of Porfolio1346 Words   |  5 Pagesbasket† and â€Å"Don’t put all your eggs in one basket†. The latter one is supported by many and known as diversification [7]. Diversification is associated with reducing risk and maximizing returns of investors and portfolio managers i.e. risk-return trade off. An investor gets benefitted by spreading his scarce resources over various assets [2, 8] which maximizes return and minimizes risk. Diversification is needed to minimize volatility i.e. measure of risk and maximize return. After the global financialRead MoreGeneral Motors Diversification1215 Words   |  5 PagesGM describes their brand politics as having two brands which will drive our global growth. They are Chevrolet, which embodies the qualities of value, reliability, performance and expressive design; and Cadillac, which creates luxury vehicles that are provocative and powerful. At the same time, the Holden, Buick, GMC, Baojun, Opel and Vauxhall brands are being carefully cultivated to satisfy as many customers as possible in select regions. As it emerged from bankruptcy and company reorganizationRead MoreGlobal Versus Regional Geographic Diversification Essay1546 Words   |  7 PagesGlobal versus Regional Geographic Diversification Recent progresses in the international business literature note down that multinational enterprises (MNEs) have a tendency to be more regional than global, in terms of width and strength of their market covering, and that the majority of their international action is conduct within their home regions. In agreement with the regionalization theory, this suggest that the responsibility of intra-regional expansion is much lower than the responsibilityRead MoreAlternative Strategies1745 Words   |  7 Pagesproducts or services in present markets through greater marketing efforts, product development which is seeking increased sales by improving present products or services or developing new ones, related diversification which is adding new but related products or services, unrelated diversification which is adding new, unrelated products or services, retrenchment which is regrouping through cost and asset reduction to reverse declining sales and profit, divestiture which is selling a di vision or part