The Diversification Delta: <i>A Different Perspective</i>

Flores, Yuri Salazar; Bianchi, Robert J.; Drew, Michael E.; Trück, Stefan

doi:10.3905/jpm.2017.43.4.112

Cited by 13 publications

(3 citation statements)

References 25 publications

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“…Resilience engineering aims to plan systems that exhibit respective characteristics, with the robustness of networks, independent of their scale, being the goal [103,105]. This scientific realm provides metrics and modeling frameworks to design system reliability: for example, in the anticipation of individual supply chain shocks [100,101], chemical process systems engineering [106], classical flexibility analysis [107], management of portfolios [108,109], and food webs and economic networks [110].…”

Section: Reliability Actionsmentioning

confidence: 99%

The circular bioeconomy: a driver for system integration

Schipfer,

Burli,

Fritsche

et al. 2024

Energ Sustain Soc

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Background Human and earth system modeling, traditionally centered on the interplay between the energy system and the atmosphere, are facing a paradigm shift. The Intergovernmental Panel on Climate Change’s mandate for comprehensive, cross-sectoral climate action emphasizes avoiding the vulnerabilities of narrow sectoral approaches. Our study explores the circular bioeconomy, highlighting the intricate interconnections among agriculture, forestry, aquaculture, technological advancements, and ecological recycling. Collectively, these sectors play a pivotal role in supplying essential resources to meet the food, material, and energy needs of a growing global population. We pose the pertinent question of what it takes to integrate these multifaceted sectors into a new era of holistic systems thinking and planning. Results The foundation for discussion is provided by a novel graphical representation encompassing statistical data on food, materials, energy flows, and circularity. This representation aids in constructing an inventory of technological advancements and climate actions that have the potential to significantly reshape the structure and scale of the economic metabolism in the coming decades. In this context, the three dominant mega-trends—population dynamics, economic developments, and the climate crisis—compel us to address the potential consequences of the identified actions, all of which fall under the four categories of substitution, efficiency, sufficiency, and reliability measures. Substitution and efficiency measures currently dominate systems modeling. Including novel bio-based processes and circularity aspects might require only expanded system boundaries. Conversely, paradigm shifts in systems engineering are expected to center on sufficiency and reliability actions. Effectively assessing the impact of sufficiency measures will necessitate substantial progress in inter- and transdisciplinary collaboration, primarily due to their non-technological nature. In addition, placing emphasis on modeling the reliability and resilience of transformation pathways represents a distinct and emerging frontier that highlights the significance of an integrated network of networks. Conclusions Existing and emerging circular bioeconomy practices can serve as prime examples of system integration. These practices facilitate the interconnection of complex biomass supply chain networks with other networks encompassing feedstock-independent renewable power, hydrogen, CO2, water, and other biotic, abiotic, and intangible resources. Elevating the prominence of these connectors will empower policymakers to steer the amplification of synergies and mitigation of tradeoffs among systems, sectors, and goals.

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Section: Reliability Actionsmentioning

confidence: 99%

The circular bioeconomy: a driver for system integration

Schipfer,

Burli,

Fritsche

et al. 2024

Energ Sustain Soc

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“…Key papers on this topic are Markowitz (1952) and more recently Booth and Fama (1992), Chua et al (2009), Choueifaty and Coignard (2008), Kinlaw et al (2021), Rudin and Morgan (2006), Flores et al (2017), andYeung et al (2012), among many others. Choueifaty and Coignard (2008) studied maximum diversification and confirmed that constant proportion portfolios earn additional returns labeled diversification returns by Booth and Fama (1992).…”

Section: Introductionmentioning

confidence: 99%

Diversification Is Not a Free Lunch

Baur

2024

JRFM

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This study analyzed the statement “diversification is a free lunch”. We empirically showed that diversification is only a free lunch under uncertainty or ignorance, confirming Warren Buffett’s “diversification is protection against ignorance”. Using historical returns of the S&P500 constituents illustrated that diversification not only decreased the risk but also the returns if the expected returns could be estimated. The findings of this study highlight that diversification reduces risk but that the risk reduction is not for free.

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“…For example, the concept of diversification in general and correlation diversification in particular is misunderstood as revealed by the 2007-2009 financial crisis (Ilmanen and Kizer 2012;Miccolis and Goodman 2012;Statman 2013). An example of an inadequate correlation diversification measure is diversification delta, which was introduced by Vermorken et al (2012) and revised by Salazar Flores et al (2017).…”

Section: Introductionmentioning

confidence: 99%

Coherent Diversification Measures in Portfolio Theory: An Axiomatic Foundation

Koumou

Dionne

2022

Risks

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We provide an axiomatic foundation for the measurement of correlation diversification in a one-period portfolio model. We propose a set of eight desirable axioms for this class of diversification measures. We name the measures satisfying these axioms coherent correlation diversification measures. We study the compatibility of our axioms with rank-dependent expected utility theory. We also test them against the two most frequently used methods for measuring correlation diversification in portfolio theory: portfolio variance and the diversification ratio. Lastly, we provide an example of a functional representation of a coherent correlation diversification measure.

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The Diversification Delta: A Different Perspective

Cited by 13 publications

References 25 publications

The circular bioeconomy: a driver for system integration

The circular bioeconomy: a driver for system integration

Diversification Is Not a Free Lunch

Coherent Diversification Measures in Portfolio Theory: An Axiomatic Foundation

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