Portfolio concentration and equity market contagion: evidence on the “flight to familiarity” across indexing methods

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Reference

Kaiser, L. (2017). Portfolio concentration and equity market contagion: evidence on the “flight to familiarity” across indexing methods. Journal of Investment Strategies, 7(1), 1-20.

Publication type

Refereed Journal Article

Abstract

This paper sheds light on the entanglement of index weighting schemes. First, we show that a high degree of absolute holdings overlap is not a sufficient measure of the level of conformity with a benchmark. Second, we take a closer look at portfolio concentration and equity market contagion. We monitor a pattern where index weighting schemes experience highly correlated returns after 2008, alongside a drop in relative portfolio holdings overlap during periods of increased market volatility. We are able to show that portfolio concentration is caused by a "flight to familiarity" and, as such, the impact of equity market contagion is largely consistent across alternative index weighting schemes.

Research

Quantitative Investment Management and Portfolio Optimisation
PhD-Thesis, March 2011 until February 2015 (finished)

Overall, the proposed dissertation project aims to contribute to academic literature by identifying research gaps in the field of quantitative investment management and answering the respective by ... more ...

Persons

Organizational Units

  • Institute for Financial Services
  • Chair in Business Administration, Banking and Financial Management

Original Source URL

Link

DOI

http://dx.doi.org/10.21314/JOIS.2017.091