Abstract
Increasing the size of a portfolio of shares reduces the variability of its returns. Whilst studies over the period 1992 to 1998 have investigated the relationship between portfolio size and risk on the JSE, the gains from diversification in South Africa have not been compared to those of another economy. This study estimates diversification benefits using the Wagner and Lau method and compares results for Australian and South African data. Overall the benefits of diversification appear to be similar across the two economies. In addition, the benefits of diversification within South Africa are greater now than they were in the late 1980s and early 1990s.