01579cas a2200241 a 4500 AALejournalIMF010610 230101c9999 xx r poo 0 0eng d 15.00 USD 9781451974232 1020-7635 BD-DhAAL BD-DhAAL International Monetary Fund. Research Dept. IMF Staff Papers, Volume 47, No. 2. Washington, D.C. : International Monetary Fund, 2000. 1 online resource (128 pages) IMF Staff Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper analyzes portfolio diversification, leverage, and financial contagion. It studies the extent to which basic principles of portfolio diversification explain 'contagious selling' of financial assets when there are purely local shocks. The paper demonstrates that the elementary portfolio theory offers key insights into 'contagion.' Most important, portfolio diversification and leverage are sufficient to explain why an investor will find it optimal to significantly reduce all risky asset positions when an adverse shock impacts just one asset. Mode of access: Internet IMF Staff Papers; IMF Staff Papers ; No. 2000/001 Full text available on IMF http://elibrary.imf.org/view/journals/024/2000/001/024.2000.issue-001-en.xml IMF e-Library