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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
    as

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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(03), pages 279-300, September.
    3. repec:wsi:ijtafx:v:06:y:2003:i:02:n:s0219024903001888 is not listed on IDEAS
    4. 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(02), pages 443-450, June.
    5. 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)

    More about this item

    Keywords

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

    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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