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Title: Money management
Keywords: dollar cost averaging, neural network
Issue Date: 26-Mar-2008
Citation: ENG MING HAO (2008-03-26). Money management. ScholarBank@NUS Repository.
Abstract: This thesis is composed of two different sections. In the first section, the effects ofthe choice of inputs into a neural network model for the prediction of foreignexchange rates are examined. Fundamental indicators such as interest rates and grossdomestic products, and technical indicators, such as moving averages and supportand resistance levels, are fed into the neural networks to see if any relationship maybe captured and improve the predictive capabilities of the model. In the secondsection, a comparison of different trading strategies and their resulting profitabilitywhen applied on a stock market with mean-reverting properties is made. The focus ison two main strategies, dollar cost averaging and value averaging. Dollar costaveraging is an investment strategy which reduces the investment risk through thesystematic purchase of securities at predetermined intervals and set amounts. Valueaveraging is a strategy in which an investor adjusts the amount invested to meet aprescribed target. Results indicate that value averaging does have higher expectedinvestment returns in a mean-reverting financial market when considering the cashflow stream of the investment. However, when a side-fund which provides loans anddeposits is introduced into the cash flow stream, value averaging fails to outperformthe market. Dollar cost averaging on the other hand does not provide superiorperformance to a random investing technique.
Appears in Collections:Master's Theses (Open)

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