Portfolio concentration: Herfindahl, Gini, and CV (Excel)
How to measure whether a fund manager or a portfolio makes concentrated bets? And how to measure risk when you do not necessarily trust the volatility estimations? The answer can be portfolio concentration measures inspired by economics and statistics. Today we cover the Herfindahl index (coming from research on industrial organisation and antitrust), Gini index (a staple in economic inequality studies), and the coefficient of variation (CV, commonly used in statistics) in their application to portfolio weights as well as some insights for portfolio optimisation with such measures.
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