2004•Application of Statistics and ManagementRequires access

Research on the Diversification of Portfolio Risk

Yanfang Yang

Abstract

Risk is the important content in finance and investment. Portfolio is one of the efficient methods to reduce investment risks. In this paper, statistical method of return and risk is discussed. Risks are divided into systematic and nonsystematic risk. The latter can be diversified through portfolio. The relation between securities correlation and portfolio risk is discussed as well. Finally, the empirical analysis is presented.

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Key concepts: Diversification (marketing strategy), Portfolio, Portfolio optimization, Modern portfolio theory, Investment portfolio, Econometrics, Actuarial science, Risk–return spectrum