The Diversification Delta: A Higher-Moment Measure for Portfolio Diversification

Document Type

Peer-Reviewed Article

Publication Date

Fall 2012

Abstract

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.

Comments

Thomas Schröder is an adjunct professor of finance in the Jack Welch College of Business, Sacred Heart University, in Luxembourg.

DOI

10.3905/jpm.2012.39.1.067

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