Complexity and the Performance of Investment Portfolios

Sanjay Goel ； Christopher D. Brown ； Hany Shawky

《Advances in Investment Analysis and Portfolio Management》 3期 (2008/11) Pp. 77-96

https://doi.org/10.6291/AIAPM.2008.03.05

並列摘要

This work examines the influence of complexity in managing investment portfolios. Complexity is a theoretical concept that is easy to conceptualize but hard to define and even harder to compute. Different measures of complexity have been defined in the literature but most of them are abstract and not very practical. Complexity has been examined in the context of several problems such as social networks, Internet, and cellular chemical behavior. In this research, complexity of decision-making is examined in the context of portfolio management. Since increased complexity entails additional costs, it is important to ensure that the cost of added complexity is reflected in improved performance. This research examines the hypothesis that the additional sophistication of analysis in portfolio management leads to improved performance. We use historical data on portfolio performance and relate it empirically to the complexity of decision-making styles. The results demonstrate a strong negative correlation between portfolio performance and the level of complexity.

並列關鍵字

Portfolio Analysis ； Investment Management ； Complexity ； Mutual Funds ； Decision Making Style ； PSN Database

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