An analysis of the diversification benefits of selected investment strategies in the Eurozone stocks

Abstract

This dissertation investigates three portfolio diversification strategies namely random portfolio, diversification across countries and diversification across industries portfolios. To make the study more reliable three portfolios of each strategy were generated. Stocks were taken from six stock indices, which represent six different countries within the cure-zone. The countries are Germany, France, Italy, Spain, Belgium and Holland. A data set spanning over two years was used. The results showed that random portfolios diversification performed better in terms of risk reduction. Over the sample period diversification random portfolio one and diversification across countries portfolio two could be combined into efficient portfolios when they were assessed in terms of risk and return