An empirical examination of the effectiveness of dollar-cost averaging using downside risk performance measures

Abstract

Some studies find the dollar-cost averaging investment strategy to be sub-optimal using a traditional Sharpe ratio performance ranking metric. Using both the Sortino ratio and the Upside Potential ratio, we empirically test four investment strategies for alternative asset investments. We find the relative ranking of dollar-cost averaging remains inferior to alternative investment strategies. (JEL G1, G11, N2)

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Correspondence to Karyl B. Leggio.

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Leggio, K.B., Lien, D. An empirical examination of the effectiveness of dollar-cost averaging using downside risk performance measures. J Econ Finan 27, 211 (2003). https://doi.org/10.1007/BF02827219

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Keywords

  • Investing Strategy
  • Risky Asset
  • Excess Return
  • Loss Aversion
  • Government Bond