The Diversification Delta: A Higher-Moment Measure for Portfolio Diversification
The article presents diversification delta (DD) measurement for analyzing portfolio diversification strategies. It discusses to the concept of Shannon entropy or information entropy in DD. It discusses characteristics of DD measurement and its application to infrastructure investments. It also illustrates how DD is related to traditional measures such as intra-portfolio correlation and the portfolio variance.
Vermorken, M., Medda, F. R., & Schröder, T. (2012). The diversification delta: A higher-moment measure for portfolio diversification. Journal of Portfolio Management, 39(1), 67-74. doi: https://doi.org/10.3905/jpm.2012.39.1.067