A note on portfolio selection, diversification and Fund-of-Funds*
نویسندگان
چکیده
This paper examines the performance and diversification properties of active Australian equity fund-of-funds (FoF). Simulation analysis is employed to examine portfolio performance as a function of the number of funds in the portfolio. The paper finds that as the number of funds in a FoF portfolio increases, performance improves in a mean-variance setting, however measures of skewness and kurtosis behave less favourably given an investor’s preferences for the higher moments of the return distribution. The majority of diversification benefits are realised when a portfolio of approximately six active equity funds are included in the FoF portfolio. JEL Classification: G23
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