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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/926

Title: A Portfolio Diversification Index as a Fund Management Instrument : a Case of Johannesburg Stock Exchange
Authors: Koomson, Francis
Issue Date: 16-Aug-2008
Series/Report no.: 4745;
Abstract: Diversification is a basic tenet of portfolio construction but the conventional methods of measuring diversification remain inexact. Traditionally, a portfolio's diversification is measured relative to a market index. This approach is problematic in concentrated markets such as the JSE as the benchmark itself is often highly concentrated. A high level of concentration results in low diversification. This report investigates a new quantitative measure of diversification called the portfolio diversification index (ibDI). The PDI is based on a number of independent factors which are quantified using Principal Component Analysis (PCA). The report shows: * 1. The diversification of various JSE market indices calculated using the PDI and illustrates the effect of concentration on diversification. 2. The use of the PDI as a tool to assist active fund managers to improve their Information Ratio. Concentration is a major factor in smaller markets and this report highlights the dangers of simply transporting international research into other markets without first verifying the results.  
Description: A thesis submitted to College of Art and Social Sciences, School of Business, 2008
URI: http://hdl.handle.net/123456789/926
Appears in Collections:College of Arts and Social Sciences

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