The relationship between diversification and firm performance varies among institutions and over time. Less is known about the advantageousness of diversification in economy-wide crises, which have occurred frequently in recent years. Using data on nearly 4000 Chinese private companies, we found that diversified firms performed better than focused firms during the recent global financial crisis. The diversification level was positively and linearly related to performance, that is, more diversified firms performed better. Moreover, we found that private firms that are totally owned by the founding owner and his/her family performed worse under crisis.
This paper considers a multi-period mean-variance portfolio selection problem with no shorting constraint. We assume that the sample space is finite, and the possible securities price vector transitions is equivalent to the number of securities. By making use of the embedding technique of Li and Ng (2000), the original nonseparable problem can be solved by introducing an auxiliary problem. After the risk neutral probability is calculated, the auxiliary problem can be solved by using the martingale method of Pliska (1986). Finally, we derive a closed form of the optimal solution to the original constrained problem.
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