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Sotiropoulos, Dimitris P. and Rutterford, Janette
(2019).
DOI: https://doi.org/10.1080/00076791.2018.1512097
Abstract
This study contributes to a growing volume of scholarship that highlights the importance of financial diversification in business history. It shows that, pre-WWI, financial advice for equal portfolio weighting, the so-called naïve diversification, then called scientific investment or geographical distribution of risk, was a sophisticated strategy for Victorian investors and not suboptimal to Markowitz optimization. Drawing upon a unique dataset of 507 individual portfolios at death, this study shows that, although Victorian investors, in particular wealthy investors, did diversify investment risk across a number of securities, they did not hold equally weighted portfolios. It explores possible reasons for the unbalanced nature of investor portfolios and dismisses socio economic factors, illiquidity, passive ‘buy the market’ and market timing strategies as possible explanatory factors. The results rather point to a strategy of naïve diversification spread over time, a ‘buy as you go and hold strategy’, buying new securities as savings allowed and holding them until death.
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About
- Item ORO ID
- 55681
- Item Type
- Journal Item
- ISSN
- 1743-7938
- Keywords
- diversification; Victorian investors; portfolio theory; risk management; Markowitz
- Academic Unit or School
-
Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL) - Research Group
- History and Political Economy (HYPE) of Business and Finance
- Copyright Holders
- © 2018 Informa UK Limited
- Depositing User
- Dimitris Sotiropoulos