Method and apparatus for evaluating the concentration of an asset portfolio
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United States of America Patent
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Issued Date -
Jul 20, 2006
app pub date -
Nov 2, 2005
filing date -
Nov 3, 2004
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Abandoned
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Abstract
Method and apparatus for determining a concentration coefficient for an asset portfolio. The concentration coefficient is determined according to the inverse of the sum of the squares of the weights of each holding in the portfolio, and expresses portfolio concentration as an equivalent number of equal-weighted holdings. In this manner, a balanced portfolio that is not weighted toward any particular holding or security is already relatively equally-weighted, and its concentration coefficient will approach the number of holdings it has. Conversely, a portfolio concentrated in few holdings will have a concentration coefficient that is lower than the number of holdings in the portfolio. Accordingly, a concentration coefficient value significantly lower than the total number of holdings generally indicates a more 'concentrated' portfolio, while a concentration coefficient value approaching the total number of holdings of a portfolio indicates that the portfolio is not concentrated, and relatively 'balanced.'
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