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In risk management, the act or strategy of adding more investments to one's portfolio to hedge against the investments already in it. Ideally, this reduces the risk inherent in any one investment, and increases the possibility of making a profit, or at least avoiding a loss. This may also reduce the expected return on a portfolio, but it depends on level and type of diversification. There are two main types of diversification. Horizontal diversification involves investing in similar investments. Examples include investing in several technology companies or in different types of bonds. Vertical diversification involves investing in very different securities; for example, one may choose to invest in securities traded in different countries, or in both winter clothing and swimsuit companies. Both types of diversification may be as broad or as narrow as the investor chooses. In general, broader diversification equates to less risk and less return. See also: Markowitz Portfolio Theory.


To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries.
References in periodicals archive ?
Given the role of product and geographic diversification as management strategies, we also include an interaction term linking the product (PDIV) and geographic diversification (GEODIV) variables to test the shared relationship with firm performance.
Given the data structure, we employ a one-way fixed-effect model to test the relationship between the insurer's level of diversification and financial performance.
Because of the focus on diversification in this article, a summary means analysis of the data is presented in Table 2 based on insurer diversification profiles.
The diversification columns in Table 2 present the diversification measures based on the modified Herfindahl Index associated with each respective profile.
Table 5 compares the dominant naive strategies and the efficient set returns, standard deviations and their effectiveness of diversification for each of the two diversification strategies considered.
The results show that for managers diversification only, the strategy of equal allocation to all managers' portfolio achieved a higher return (19.
Our analysis of managers' diversification within Nigerian market during the period 1997 - 2001 shows that efficient portfolios (constant correlation model portfolios) outperformed all strategies based on "all allocation in one property manager's portfolio" and the strategy based on "equal allocation to each of the managers".
Although, the study did not test the statistical significance of the benefits being found from managers' diversification and examine the effects of cycle on the performance of the portfolios, it has shown that there are benefits derivable from managers' diversification.
what synergies are developed through shared financial resources; how do diversifications contribute to the revenue stream; how financially successful and personally rewarding are diversifications).
An undetermined number of CEE/CIS entrepreneurs operate MEs which provide a mix of various product lines and/or services through internal diversification.
Although descriptive research ondiversified MEs in the United States (US) exists (Lynn and Reinsch, 1990), it is reasonable to suspect that economic differences between the US and CEE/CIS transitional economies translates into different patterns and causes of ME diversification within the two regions.
Micro-firm diversification can be manifest in at least two general forms (see Figure 1).

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