The benefits of sectoral diversification for investors with different risk perceptions

IF 6.3 2区经济学 Q1 BUSINESS, FINANCE

Borsa Istanbul Review Pub Date : 2025-03-02 DOI:10.1016/j.bir.2025.02.008

Serdar Yaman , Mert Baran Tuncel

{"title":"The benefits of sectoral diversification for investors with different risk perceptions","authors":"Serdar Yaman , Mert Baran Tuncel","doi":"10.1016/j.bir.2025.02.008","DOIUrl":null,"url":null,"abstract":"<div><div>This paper explores the benefits of sectoral diversification in equity investments, comparing traditional and modern portfolio management frameworks for investors with different risk perceptions. We use monthly price data on 200 companies, listed on the Borsa Istanbul, for the period January 2019–August 2024. The analysis employs an equal-weighted (EW) strategy, grounded in traditional portfolio theory, and strategies for risk-averse investors (RAI) and risk-tolerant investors (RTI), based on modern portfolio theory. We find that sectoral diversification can mitigate risks associated with poor performance in a specific sector. Modern portfolio management, which uses both intra- and inter-sectoral diversification, outperforms traditional methods. Our results show that the impact of sectoral diversification on utility maximization differs significantly by the type of investor. For RAI, sectoral diversification provides minimal benefits for maximizing utility, whereas, for RTI, it offers significant advantages. These conclusions are reached based on 11 risk-adjusted performance measurement and a Value-at-Risk analysis.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 3","pages":"Pages 597-616"},"PeriodicalIF":6.3000,"publicationDate":"2025-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Borsa Istanbul Review","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2214845025000444","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

This paper explores the benefits of sectoral diversification in equity investments, comparing traditional and modern portfolio management frameworks for investors with different risk perceptions. We use monthly price data on 200 companies, listed on the Borsa Istanbul, for the period January 2019–August 2024. The analysis employs an equal-weighted (EW) strategy, grounded in traditional portfolio theory, and strategies for risk-averse investors (RAI) and risk-tolerant investors (RTI), based on modern portfolio theory. We find that sectoral diversification can mitigate risks associated with poor performance in a specific sector. Modern portfolio management, which uses both intra- and inter-sectoral diversification, outperforms traditional methods. Our results show that the impact of sectoral diversification on utility maximization differs significantly by the type of investor. For RAI, sectoral diversification provides minimal benefits for maximizing utility, whereas, for RTI, it offers significant advantages. These conclusions are reached based on 11 risk-adjusted performance measurement and a Value-at-Risk analysis.

查看原文本刊更多论文

本文针对不同风险认知的投资者，比较了传统和现代投资组合管理框架，探讨了股票投资中行业多样化的益处。我们使用了伊斯坦布尔证券交易所上市的 200 家公司在 2019 年 1 月至 2024 年 8 月期间的月度价格数据。分析采用了基于传统投资组合理论的等权重（EW）策略，以及基于现代投资组合理论的风险规避型投资者（RAI）和风险容忍型投资者（RTI）策略。我们发现，行业分散投资可以降低特定行业业绩不佳带来的风险。同时采用行业内和行业间分散投资的现代投资组合管理优于传统方法。我们的研究结果表明，投资者类型不同，行业分散化对效用最大化的影响也大相径庭。对 RAI 而言，行业分散投资对效用最大化的益处微乎其微，而对 RTI 而言，行业分散投资则具有显著优势。这些结论是根据 11 项风险调整绩效衡量和风险价值分析得出的。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Borsa Istanbul Review Multiple-

CiteScore

7.60

自引率

3.80%

发文量

130

审稿时长

26 days

期刊介绍： Peer Review under the responsibility of Borsa İstanbul Anonim Sirketi. Borsa İstanbul Review provides a scholarly platform for empirical financial studies including but not limited to financial markets and institutions, financial economics, investor behavior, financial centers and market structures, corporate finance, recent economic and financial trends. Micro and macro data applications and comparative studies are welcome. Country coverage includes advanced, emerging and developing economies. In particular, we would like to publish empirical papers with significant policy implications and encourage submissions in the following areas: Research Topics: • Investments and Portfolio Management • Behavioral Finance • Financial Markets and Institutions • Market Microstructure • Islamic Finance • Financial Risk Management • Valuation • Capital Markets Governance • Financial Regulations