Exponential growth of fixed-mix strategies in stationary asset markets

Igor Evstigneev, Michal A. H. Dempster () and Klaus Schenk-Hoppé
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Michal A. H. Dempster: Centre for Financial Research, Judge Institute of Management, University of Cambridge, Trumpington Street, Cambridge, CB2 1AG, UK

Finance and Stochastics, 2003, vol. 7, issue 2, 263-276

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.

Keywords: Asset allocation; fixed-mix strategies; stationary markets; exponential growth; products of random matrices; stochastic version of the Perron-Frobenius theorem (search for similar items in EconPapers)
JEL-codes: F31 G11 (search for similar items in EconPapers)
Date: 2002-12-10
Note: received: February 2002; final version received: May 2002
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Citations: View citations in EconPapers (7)

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