Determining the Optimum Level of Diversification of Home Brokers Investors

Abstract

This paper has the objective of determining the number of stocks that diversify a portfólio of Bovespa stocks of home brokers investors. We find the number of stocks that diversifies the portfólio by equalizing the benefit with the cost of including one more stock in the portfólio. To find the benefit, we use a methodology that is similar to Statman (1987). To find the cost we use an original methodology, in which we weight the costs of major brokers taking in consideration the volume transacted by them. The number of stocks that diversify our portfólio is 12.