Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/147642
Title: AN ANALYSIS OF DOLLAR COST AVERAGING
Authors: CHUA WEI LIN MARIANNE
Issue Date: 2012
Citation: CHUA WEI LIN MARIANNE (2012). AN ANALYSIS OF DOLLAR COST AVERAGING. ScholarBank@NUS Repository.
Abstract: This thesis investigates the performance of the Dollar Cost Averaging strategy relative to the Lump Sum and 50-50 Rebalanced Portfolio strategy. Using the MSCI Developed and Emerging Markets indices as a proxy for ETF returns, we examine the performance of these strategies across 23 developed and 20 emerging markets, for investment horizons of one to thirty years. Our results show that the Lump Sum strategy outperforms the Dollar Cost Averaging strategy in terms of the Sortino and Upside Potential ratios and these results are consistent across international markets and investment horizons. This implies that an investor investing in ETFs should invest in one lump sum to achieve higher risk-adjusted returns, regardless of the length of his intended investment horizon or the market he wishes to invest in. Furthermore, we also show that the Dollar Cost Averaging strategy is inferior to the 50-50 Rebalanced Portfolio strategy in terms of risk reduction. Therefore, risk-averse investors who are afraid of missing their investment targets but would still like some participation in the equity market should choose the Rebalanced Portfolio over the Dollar Cost Averaging strategy.
URI: http://scholarbank.nus.edu.sg/handle/10635/147642
Appears in Collections:Bachelor's Theses

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