1
$\begingroup$

Is there any recent paper on how many assets one should consider for portfolio optimization techniques?

I found:

– https://www.jstor.org/stable/2330969?seq=1#metadata_info_tab_contents

– https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1981.tb00646.x

Improve this question
$\endgroup$
1
  • $\begingroup$ The expected Sharpe is bounded by number of assets, true effect size, and length of history. The math here suggests a small number of degrees of freedom (probably less than 10) in any portfolio optimizer, but it depends on sample size. $\endgroup$
    – shabbychef
    Nov 16, 2021 at 18:17

1 Answer 1

Reset to default
4
$\begingroup$

The first article on this was Fisher and Lorie "Some studies of variability of returns on investments in common stocks" JB April 1970. https://www.jstor.org/stable/2352105

The Statman article you quote "How many stocks make a diversified portfolio" is from 1987, it is still referenced and broadly agrees with the other.

A more recent article is Ronald Surz and Mitchell Price "Diversification by the Numbers" JOI 2000 which argues that more stocks may be needed than suggested by the earlier literature http://ppca-inc.com/Articles/DiversByNumbers.pdf

This is not a very active area of research AFAIK, I consider it a rather boring and settled issue.

Improve this answer
$\endgroup$
1
  • $\begingroup$ I just found out from a friend that a literature review article on this topic was just published, with a long bibliography. Zaimovic, Omanovich and Arnaut are the authors. mdpi.com/1911-8074/14/11/551/htm It may interest you if you are looking for additional articles $\endgroup$
    – nbbo2
    Dec 7, 2021 at 20:04

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.