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
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, F31working papers series
Date posted: April 11, 2002
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