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A study of the differences among representative investment strategies

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  • Huang, Hong-Chih
  • Lee, Yung-Tsung

Abstract

This study compares the differences and efficiencies of investment strategies among anticipative and adaptive models using three representative decision approaches: the static approach (SA), semidynamic strategy (or re-assess by static approach, Re-SA), and dynamic programming (DP). We show that each approach has individual merits and weaknesses. A DP strategy may allow for relatively aggressive decisions because of opportunities to adapt the decisions later. However, that strategy may result in a serious downside risk. The suboptimal adaptive strategy, Re-SA, acts as a good proxy for the DP strategy. Therefore, both SA and Re-SA are important tools for addressing asset allocation problems.

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  • Huang, Hong-Chih & Lee, Yung-Tsung, 2020. "A study of the differences among representative investment strategies," International Review of Economics & Finance, Elsevier, vol. 68(C), pages 131-149.
    • Handle: RePEc:eee:reveco:v:68:y:2020:i:c:p:131-149
    DOI: 10.1016/j.iref.2020.03.007
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    More about this item

    Keywords

    Investment strategy; Anticipative model; Adaptive model; Static approach; Dynamic approach;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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