Several contributions in the literature argue that a significant in-sample risk reduction can be obtained by investing in a relatively small number of assets in an investment universe. Furthermore, selecting small portfolios seems to yield good out-of-sample performances in practice. This analysis provides further evidence that an appropriate preselection of the assets in a market can lead to an improvement in portfolio performance.
SIMILAR POSTS
The Link between Default and Recovery Rates: effects on the procyclicality of regulatory capital ratios
This paper analyses the impact of various assumptions about the association between aggregate default probabilities and the loss given default [...]
Credit Risk Scoring Models
Credit scoring models play a fundamental role in the risk management practice at most banks. They are used to quantify [...]
Measuring and Managing Credit and Other Risks
During the last 40 years, risk management has evolved tremendously. The technologies and methodologies to measure risks have reached impressive [...]
