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What is Optimal Stock Count for Diversification about?
This working paper investigates the optimal number of stocks needed for effective equity portfolio diversification in India, challenging the traditional view that 15-20 stocks are sufficient. The authors conclude that a portfolio of 40-50 stocks is necessary to achieve a 90% reduction in unsystematic risk with a 90% confidence level. The paper provides a practical framework for investors to determine the appropriate number of stocks based on their risk-reduction expectations.
- Author
- majrikarlalit
- Language
- EN