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Dollar-Cost Averaging with Yearly and Biyearly Installments

Author

Listed:
  • Michele Bisceglia

    (University of Bergamo, Italy)

  • Paola Zola

    (University of Brescia, Italy)

Abstract

In this paper the authors considered Dollar-Cost Averaging (DCA) strategies with yearly and biyearly installments and compared their gross returns with those of a lump-sum investment for different medium-long term investment time horizons (between 5 and 20 years). The empirical analysis is conducted on several stock indices by means of rolling observation periods. The authors found that the average annual returns of the lump-sum investment are, in general, higher than those of the two considered DCA strategies and the percentage of observations in which the lump-sum outperforms both the considered DCA is higher for longer investment time horizons.

Suggested Citation

  • Michele Bisceglia & Paola Zola, 2018. "Dollar-Cost Averaging with Yearly and Biyearly Installments," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 7(1), pages 1-14, February.
    • Handle: RePEc:ods:journl:v:7:y:2018:i:1:p:1-14
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    References listed on IDEAS

    as
    1. Leggio, Karyl B. & Lien, Donald, 2001. "Does loss aversion explain dollar-cost averaging?," Financial Services Review, Elsevier, vol. 10(1-4), pages 117-127.
    2. Brennan, M.J. & Solanki, R., 1981. "Optimal Portfolio Insurance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(3), pages 279-300, September.
    3. Moshe A. Milevsky & Steven E. Posner, 2003. "A Continuous-Time Reexamination Of Dollar-Cost Averaging," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 173-194.
    4. Knight, John R. & Mandell, Lewis, 1992. "Nobody gains from dollar cost averaging analytical, numerical and empirical results," Financial Services Review, Elsevier, vol. 2(1), pages 51-61.
    5. Constantinides, George M., 1979. "A Note on the Suboptimality of Dollar-Cost Averaging as an Investment Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(2), pages 443-450, June.
    6. Karyl Leggio & Donald Lien, 2003. "An empirical examination of the effectiveness of dollar-cost averaging using downside risk performance measures," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 27(2), pages 211-223, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jianhua Ding & Turen Guo & Bin Guo, 2018. "Fat Tails, Value at Risk, and the Palladium Returns," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 7(2), pages 95-103, May.

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    More about this item

    Keywords

    investment strategies; dollar-cost averaging; stock indices; rolling windows; investment time horizon; total gross returns; average gross returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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