Can Portfolio Diversification Increase Systemic Risk?: Evidence from the US and European Mutual Funds Market

The IUP Journal of Financial Risk Management, Vol. IX, No. 4, pp. 52-76, December 2012

Posted: 12 Dec 2012

See all articles by Claudio Dicembrino

Claudio Dicembrino

Department of Strategic Planning

Pasquale L. Scandizzo

University of Rome

Date Written: December 11, 2012

Abstract

This paper tests the hypothesis that portfolio diversification can increase the threat of systemic financial risk. The paper first provides a theoretical rationale for the possibility that systemic risk may be increased by the proliferation of financial instruments that lead operators to hold increasingly similar portfolios. Secondly, the paper tests the hypothesis that diversification may result in increasing the systemic risk by analyzing the portfolio dynamics of some of the major world open funds.

Suggested Citation

Dicembrino, Claudio and Scandizzo, Pasquale Lucio, Can Portfolio Diversification Increase Systemic Risk?: Evidence from the US and European Mutual Funds Market (December 11, 2012). The IUP Journal of Financial Risk Management, Vol. IX, No. 4, pp. 52-76, December 2012, Available at SSRN: https://ssrn.com/abstract=2187688

Claudio Dicembrino (Contact Author)

Department of Strategic Planning ( email )

Viale Regina Margherita 137
Rome, RM 00198
Italy

Pasquale Lucio Scandizzo

University of Rome ( email )

Via Columbia, 2
Rome, I-00133
Italy
+3906/72595929 (Phone)
+3906/2040219 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
286
PlumX Metrics