This confuses me - above in Method III you wrote (emphasis added by me) "Method III: The diversification benefit for an equal weight, rebalanced portfolio of serially-uncorrelated-returns assets", which I agree with. But here you write "market-cap weighted", which just gives you ... market returns and variance?"Market cap weighted" slicing and dicing can only decrease variance (thus, improve geometric return) as can be seen in the formula for "Method III": all 4 multiplicands in the diversification benefit are positive.If you don’t know how slice-n-dicing affects the volatility, then you can’t make an intelligent decision on whether or not to do so
Statistics: Posted by brightlightstonight — Tue Aug 13, 2024 6:58 pm — Replies 14 — Views 1607