Does Diversification Explain Market Anomalies ?
نویسندگان
چکیده
Empirical evidence suggests that stockholders do not diversify their portfolios to any significant level, and they are compensated for bearing idiosyncratic risk. In this paper, we breakdown the abnormal returns of size, value, long-term-reversal, momentum, and short-term contrarian premiums into diversification and net selectivity components to find that the anomalies in the U.S. and the international capital markets vanish when the effects of foregone diversification are taken into account.
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