How Should Individual Investors Diversify? An Empirical Evaluation of Alternative Asset Allocation Policies
How Should Individual Investors Diversify? An Empirical Evaluation of Alternative Asset Allocation Policies ArXiv ID: ssrn-1471955 “View on arXiv” Authors: Unknown Abstract This paper evaluates numerous diversification strategies as a possible remedy against widespread costly investment mistakes of individual investors. Our results Keywords: diversification strategies, investment mistakes, individual investors, Equities Complexity vs Empirical Score Math Complexity: 3.5/10 Empirical Rigor: 8.0/10 Quadrant: Street Traders Why: The paper employs robust statistical methods like bootstrap tests and multi-factor regressions, but focuses on evaluating existing heuristic strategies rather than developing new complex mathematics. Its empirical rigor is high due to the extensive backtesting framework, use of real ETF-accessible indices, and sensitivity checks. flowchart TD A["Research Question<br>Optimal Diversification for Individuals?"] --> B["Methodology<br>Empirical Evaluation of Allocation Policies"] B --> C["Data Inputs<br>Equity Returns & Investor Constraints"] C --> D["Computation<br>Backtest Strategies on Historical Data"] D --> E["Key Outcomes<br>Costly Mistakes Identified &<br>Effective Diversification Remedies"]