Optimal Buy-and-Hold Strategies for Financial Markets with Bounded Daily Returns

Details Optimal Buy-and-Hold Strategies for Financial Markets with Bounded Daily Returns Optimal Buy-and-Hold Strategies for Financial Markets with Bounded Daily Returns

2000-11-14

arxiv.org/abs/cs/0011018v1

Computer Science

Computational Engineering, Finance, and Science

The journal version will appear in SIAM Journal on Computing. A preliminary version appeared in Proceedings of the 31st Annual

Scientific paper

In the context of investment analysis, we formulate an abstract online computing problem called a planning game and develop general tools for solving such a game. We then use the tools to investigate a practical buy-and-hold trading problem faced by long-term investors in stocks. We obtain the unique optimal static online algorithm for the problem and determine its exact competitive ratio. We also compare this algorithm with the popular dollar averaging strategy using actual market data.

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