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Exponential growth of fixed-mix strategies in stationary asset markets

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Abstract.

The paper analyzes the long-run performance of dynamic investment strategies based on fixed-mix portfolio rules. Such rules prescribe rebalancing the portfolio by transferring funds between its positions according to fixed (time-independent) proportions. The focus is on asset markets where prices fluctuate as stationary stochastic processes. Under very general assumptions, it is shown that any fixed-mix strategy in a stationary market yields exponential growth of the portfolio with probability one.

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Authors and Affiliations

  1. Centre for Financial Research, Judge Institute of Management, University of Cambridge, Trumpington Street, Cambridge, CB2 1AG, UK (e-mail: mahd2@cam.ac.uk) , , , , , , GB

    Michal A. H. Dempster

  2. School of Economic Studies, University of Manchester, Oxford Road, Manchester, M13 9PL, UK (e-mail: igor.evstigneev@man.ac.uk) , , , , , , GB

    Igor V. Evstigneev

  3. Institute for Empirical Research in Economics, University of Zurich, Blümlisalpstrasse 10, 8006 Zürich, Switzerland (e-mail: klaus@iew.unizh.ch) , , , , , , CH

    Klaus R. Schenk-Hoppé

Authors
  1. Michal A. H. Dempster
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  2. Igor V. Evstigneev
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  3. Klaus R. Schenk-Hoppé
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Additional information

Manuscript received: February 2002; final version received: May 2002

Research supported in part by the Swiss Research Foundation for Banking and Finance and the Ecoscientia Stiftung.

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Dempster, M., Evstigneev, I. & Schenk-Hoppé, K. Exponential growth of fixed-mix strategies in stationary asset markets. Finance Stochast 7, 263–276 (2003). https://doi.org/10.1007/s007800200081

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  • DOI: https://doi.org/10.1007/s007800200081

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