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The Journal of Portfolio Management

The Journal of Portfolio Management

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Primary Article

A Portfolio Diversification Index

Alexander M. Rudin and jonathan S. Morgan
The Journal of Portfolio Management Winter 2006, 32 (2) 81-89; DOI: https://doi.org/10.3905/jpm.2006.611807
Alexander M. Rudin
A First Vice President, Director of Quantitative Research at Julius Baer Financial Markets, LLC in New York
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  • For correspondence: alexander.rudin@juliusbaer.com
jonathan S. Morgan
A managing director at Barclays Global Investors in New York
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  • For correspondence: jonathan.morgan@barclaysglobal.com
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Abstract

Despite the importance of diversification in portfolio construction, our current methods of measuring it are inefficient. Construction of a Portfolio Diversification Index (PDI) presents a new way to understand the concept. PDI, which measures the number of unique investments in a portfolio, is useful to assess marginal and cumulative diversification benefits across asset classes and across time. Implementation in hedge fund strategies reveals that various hedge funds offer less diversification than may have been thought, and that there has been reduced diversification in the past several years

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The Journal of Portfolio Management
Vol. 32, Issue 2
Winter 2006
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A Portfolio Diversification Index
Alexander M. Rudin, jonathan S. Morgan
The Journal of Portfolio Management Jan 2006, 32 (2) 81-89; DOI: 10.3905/jpm.2006.611807

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A Portfolio Diversification Index
Alexander M. Rudin, jonathan S. Morgan
The Journal of Portfolio Management Jan 2006, 32 (2) 81-89; DOI: 10.3905/jpm.2006.611807
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