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Fractal portfolio strategies: does scale preference of investors matter?

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  • Shinji Kakinaka
  • Tadaaki Hayakawa
  • Daisuke Kato
  • Ken Umeno

Abstract

The mean-DCCA portfolio is known to consider the assets’ nonlinearity and scaling properties by embedding the fractal correlation into the mean-variance criterion, with specific strategies under the assumption that the scale preference of investors is constant. We examine whether accounting for changes in investors’ scale preference in response to market conditions improves portfolio performance. A portfolio with preference on short-scales is effective under market uncertainty, while long-scale preference strategy is effective under a steady market. Our results support the Fractal Market Hypothesis and reveal the potential effect of investor heterogeneity on portfolio risk reduction.

Suggested Citation

  • Shinji Kakinaka & Tadaaki Hayakawa & Daisuke Kato & Ken Umeno, 2025. "Fractal portfolio strategies: does scale preference of investors matter?," Applied Economics Letters, Taylor & Francis Journals, vol. 32(3), pages 415-421, February.
    • Handle: RePEc:taf:apeclt:v:32:y:2025:i:3:p:415-421
    DOI: 10.1080/13504851.2023.2274298
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