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Exponential Growth of Fixed-Mix Strategies in Stationary Asset Markets


M. A. H. Dempster


University of Cambridge - Judge Business School, Centre for Financial Research

Klaus Reiner Schenk-Hoppé


University of Leeds - Leeds University Business School; University of Leeds - School of Mathematics

Igor V. Evstigneev


University of Manchester - Economics, School of Social Sciences

U of Cambridge Working Paper No. WP 01/2002

Abstract:     
The paper analyzes the long-run performance of dynamic investment strategies based on fixed-mix portfolio rules. Such rules prescribe to rebalance 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 an exponential growth of the portfolio with probability one.

Number of Pages in PDF File: 16

Keywords: Asset allocation, Fixed-mix strategies, Stationary markets, Exponential growth, Products of random matrices, Stochastic version of the Perron-Frobenius theorem

JEL Classification: G11, F31

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Date posted: April 11, 2002  

Suggested Citation

Dempster, M. A. H., Schenk-Hoppé, Klaus Reiner and Evstigneev, Igor V., Exponential Growth of Fixed-Mix Strategies in Stationary Asset Markets. U of Cambridge Working Paper No. WP 01/2002. Available at SSRN: http://ssrn.com/abstract=307095 or http://dx.doi.org/10.2139/ssrn.307095

Contact Information

M. A. H. Dempster
University of Cambridge - Judge Business School, Centre for Financial Research ( email )
Statistical Laboratory
University of Cambridge
Cambridge, CB3 0WB
United Kingdom
+44(0)1223 557643 (Phone)
+44(0)1223 557641 (Fax)
HOME PAGE: http://www.cfr.statslab.cam.ac.uk
Klaus Reiner Schenk-Hoppé
University of Leeds - Leeds University Business School ( email )
Keyworth Building
Leeds, LS2 9JT
United Kingdom
+44 113 343 4513 (Phone)
+44 113 343 4495 (Fax)
HOME PAGE: http://www.schenk-hoppe.net
University of Leeds - School of Mathematics ( email )
Woodhouse Lane
Leeds, LS2 9JT
United Kingdom
+44 113 343 5187 (Phone)
+44 113 343 5090 (Fax)
HOME PAGE: http://www.schenk-hoppe.net
Igor V. Evstigneev (Contact Author)
University of Manchester - Economics, School of Social Sciences ( email )
Oxford Road
Manchester, M13 9PL
United Kingdom
+44 161 2754275 (Phone)
+44 161 2754812 (Fax)
HOME PAGE: http://www.evstigneev.net
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