Growing Wealth with Fixed-Mix Strategies

This chapter surveys theoretical research on the long-term performanceof xed-mix investment strategies. These self-nancing strategies rebalancethe portfolio over time so as to keep constant the proportionsof wealth invested in various assets. The main result is that wealthcan be grown from volatility.[...]

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Year of publication:	2009-11-06
Authors:	Evstigneev, Igor’ V. ; Schenk-Hoppé, Klaus R.
Institutions:	National Centre of Competence in ResearchFinancial Valuation and Risk Management
Subject:	Kreditmarkt \| Strategie \| Volatilität \| Transaktionskosten \| Proportion \| proportion

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1 Introduction
1.1 A test of your intuition
1.2 An illustrative example
1.3 Notation
2 Asset markets with stationary prices
2.1 The model
2.2 The growth rate
2.3 Interpretation
3 Fixed-mix strategies in stationary markets
3.1 The model
3.2 Currency markets
3.3 The growth rate
3.4 Price processes with trend
4 Stock markets with stationary returns
4.1 The model
4.2 The growth rate
4.3 Interpretation
5 Myths and misconceptions
5.1 Volatility pumping
5.2 The importance of constancy
5.3 Energy-interpretation of volatility
5.4 A counter-example
5.5 Growth under transaction costs
6 Conclusion

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