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Outline. Business and Economics portal. Money portal. v. t. e. In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.
Modern portfolio theory ( MPT ), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is less risky than owning ...
Strategy. Porter's generic strategies describe how a company pursues competitive advantage across its chosen market scope. There are three/four generic strategies, either lower cost, differentiated, or focus. A company chooses to pursue one of two types of competitive advantage, either via lower costs than its competition or by differentiating ...
Inflation, interest rates, recessions, and wars are examples of systematic risk. Systematic risk cannot be fully eliminated through diversification since the risk applies across the market.
Systematic risk exists in projects and is called the overall project risk bred by the combined effect of uncertainty in external environmental factors such as PESTLE, VUCA, etc. It is also called contingent or unplanned risk or simply uncertainty because it is of unknown likelihood and unknown impact. In contrast, systemic risk is known as the ...
While this diversification strategy can help mitigate risk, it’s essential to carefully consider the fund’s investment focus, since ESG and similar funds vary in their criteria.
Naive diversification. Naïve diversification is a choice heuristic (also known as "diversification heuristic" [1] ). Essentially, when asked to make several choices at once, people tend to diversify more than when making the same type of decision sequentially. Its first demonstration was made by Itamar Simonson in marketing in the context of ...
v. t. e. A conglomerate ( / kəŋˈɡlɒmərət /) is a type of multi-industry company that consists of several different and unrelated business entities that operate in various industries under one corporate group. [1] A conglomerate usually has a parent company that owns and controls many subsidiaries, which are legally independent but ...