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How Many Stocks Make a Diversified Portfolio?

Published online by Cambridge University Press:  06 April 2009

Meir Statman
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Abstract

We show that a well-diversified portfolio of randomly chosen stocks must include at least 30 stocks for a borrowing investor and 40 stocks for a lending investor. This contradicts the widely accepted notion that the benefits of diversification are virtually exhausted when a portfolio contains approximately 10 stocks. We also contrast our result with the levels of diversification found in studies of individuals' portfolios.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 22 , Issue 3 , September 1987 , pp. 353 - 363
Copyright
Copyright © School of Business Administration, University of Washington 1987

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