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Research Department

August-01-12

The diversity index and investment portfolios

The diversity index is a concept that PWL has borrowed from the field of ecology. In 1949, statistician Edward H. Simpson developed a simple formula to measure the diversity of species. This formula was later applied in economics as a tool to measure the diversity of industries, which helped antitrust regulators answer questions like “Is Microsoft so large, relative to its industry, that it can control prices?” The more concentrated an industry is, the more likely it is that prices won’t be set competitively, at the lowest possible price.

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By: Raymond Kerzérho | 0 comments