Optimal diversification across mutual funds Articles uri icon

publication date

  • January 2013

start page

  • 119

end page

  • 122


  • 2


  • 23

International Standard Serial Number (ISSN)

  • 0960-3107

Electronic International Standard Serial Number (EISSN)

  • 1466-4305


  • We evaluate a strategy that minimizes the specific risk of investing in a reasonable number of mutual funds. Our results are consistent with the previous studies, which suggest that actively managed mutual funds are not totally diversified. Our strategy behaves well in terms of diversification, not only in-sample but also out-of-sample. Using different benchmarks, minimizing idiosyncratic risk is also the best strategy for investors seeking alpha.