The Open UniversitySkip to content

Financial diversification strategies before World War I: Buy-and-hold versus naïve portfolio selection

Sotiropoulos, Dimitris P. and Rutterford, Janette (2019). Financial diversification strategies before World War I: Buy-and-hold versus naïve portfolio selection. Business History, 61(7) pp. 1175–1198.

Full text available as:
Full text not publicly available (Accepted Manuscript)
Due to publisher licensing restrictions, this file is not available for public download until 15 April 2020
Click here to request a copy from the OU Author.
DOI (Digital Object Identifier) Link:
Google Scholar: Look up in Google Scholar


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.

Item Type: Journal Item
Copyright Holders: 2018 Informa UK Limited
ISSN: 1743-7938
Keywords: diversification; Victorian investors; portfolio theory; risk management; Markowitz
Academic Unit/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)
Item ID: 55681
Depositing User: Dimitris Sotiropoulos
Date Deposited: 03 Jul 2018 13:22
Last Modified: 30 Sep 2019 10:27
Share this page:


Altmetrics from Altmetric

Citations from Dimensions

Actions (login may be required)

Policies | Disclaimer

© The Open University   contact the OU