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Growing Wealth with Fixed-Mix Strategies

34 Pages Posted: 28 Sep 2009 Last revised: 14 Dec 2009

M. A. H. Dempster

University of Cambridge - Centre for Financial Research; Cambridge Systems Associates Limited

Igor V. Evstigneev

University of Manchester - Economics, School of Social Sciences

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics; Norwegian School of Economics (NHH) - Department of Finance

Date Written: November 6, 2009

Abstract

This chapter surveys theoretical research on the long-term performance of fixed-mix investment strategies. These self-financing strategies rebalance the portfolio over time so as to keep constant the proportions of wealth invested in various assets. The main result is that wealth can be grown from volatility. Our findings demonstrate the benefits of active portfolio management and the potential of financial engineering.

Keywords: Volatility, Constant proportions strategies, Fixed-mix strategies, Financial markets, Investment, Exponential growth, Transaction costs

JEL Classification: G11

Suggested Citation

Dempster, M. A. H. and Evstigneev, Igor V. and Schenk-Hoppé, Klaus Reiner, Growing Wealth with Fixed-Mix Strategies (November 6, 2009). Swiss Finance Institute Research Paper No. 09-37. Available at SSRN: https://ssrn.com/abstract=1479444 or http://dx.doi.org/10.2139/ssrn.1479444

M. A. H. Dempster

University of Cambridge - Centre for Financial Research ( email )

Centre for Mathematical Sciences
Wilberforce Road
Cambridge, CB3 0WA
United Kingdom

Cambridge Systems Associates Limited ( email )

5-7 Portugal Place
Cambridge, CB5 8AF
United Kingdom

Igor V. Evstigneev

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

Klaus Reiner Schenk-Hoppé (Contact Author)

University of Manchester - Department of Economics ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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