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Markku Kurtti – Diversification is a Negatively Priced Lunch (S7E7)

Flirting with Models

CHAPTER

Debating Stock Investment Strategies and Portfolio Performance

This chapter explores the debate on stock investment strategies, specifically focusing on the performance of large US companies and the argument for outperforming the market by avoiding big stocks. It discusses the complexities of comparing individual stock performance to benchmarks and reviews academic literature on the benefits of an all equity portfolio versus a leveraged 60-40 portfolio. The chapter further delves into the impact of uncertainty on optimal leverage choices, geometric growth rates, and the diversification premium in relation to risk and volatility.

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