Undiversified


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Undiversified

In risk management, the state of one's portfolio when it contains only a few securities or classes of securities. For example, if one invests exclusively in automotive companies or only in bonds, one has an undiversified portfolio. An undiversified portfolio carries a great deal of risk; for instance, if automotive companies or bonds perform poorly, it does not matter how well the rest of the market performs. On the other hand, the potential for gains is higher. In general, broader diversification equates to less risk and less return. See also: Markowitz Portfolio Theory.
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In this latter article, Hu focuses primarily on the significance of the proliferation of new financial products, such as multiple classes of equity-like claims and new hedging instruments for the determination of whether the fictional undiversified shareholder concept or the fictional diversified shareholder concept provides the more appropriate framework for corporate investment decisions.
For undiversified property-liability insurers, restricted stock awards increase significantly with regulatory attention.
For example, the median price-to-earnings (P/E) ratio of diversified stocks at current prices is only trading at 10 times as against 17 times of undiversified stocks, offering a huge discount of 41 percent.
Ratings agency Standard & Poors commented: "The economy is undiversified and vulnerable to a sharp and sustained decline in global prices, despite the government's policy to promote non-hydrocarbon private sector growth." But it notes that the kingdom's economy is supported by its very strong fiscal and external positions of as much as $775 billion which could provide ample buffer to withstand external shocks including a drop in global oil prices.
"We view Saudi Arabia's economy as undiversified and vulnerable to a sharp and sustained decline in the oil price, notwithstanding government policy to encourage non-oil private sector growth," S&P said.
There still aren't enough barbers, babysitters, and taxicab drivers that own an undiversified portfolio of Twitter, Weibo, and GrubHub.
However, Moody's says that these positive factors are counterbalanced by (1) an undiversified economy heavily reliant on the oil and gas sector; (2) the system's relatively high dependence on short-term foreign funding; and (3) a still-developing corporate-governance and risk-management culture.
Suddenly, daily production of about 350,000 barrels of oil were shuttered, taking an immense toll on both countries' undiversified economies.
Despite these positive factors, Moody's stable outlook on the Omani banking system also takes account of the structural weaknesses related to the banks' high dependence on the small undiversified Omani economy, which is reliant on hydrocarbon-sector performance, and the high borrower concentrations that expose banks to event risk.
It also takes into account its relatively undiversified business model and somewhat limited franchise, concentrated chiefly on large corporate clients and consumer finance.
"We developed the BulletShares[TM] indexing methodology based on feedback we received from financial advisors who told us they appreciated the customization and return of capital feature afforded by individual bonds, but were concerned about the concentration risk associated with investments in undiversified portfolios," said Mr.
The preferences of diversified investors are quite different from those of undiversified investors.