1) I care about the investor return, not the asset return or any of the other metrics you listed, because that’s the return I get.
2) I wasn’t suggesting that an investor could buy on the lows. I was saying that the investor could buy in every period, but only an amount that is constant in dollar terms (or in terms of some other risk-free asset). This would then exceed the asset’s average return, though both might be negative.
1) Obviously you’re concered about invstor return (well utility anyway), I never intended to suggested there was any other metric you’d be interested in. Surely our previous conversations should have convinced you I’m not one to make that kind of mistake frequently.
2) Dollar cost averaging gets you something if there’s mean reversion. Otherwise it gains you nothing (might not cost you anything either) for the simple reason that asset prices are random walks. This is a standard result (http://www.moneychimp.com/features/dollar_cost.htm). If you think Falkenstein’s model implies that dollar cost averaging is a superior strategy, then I think you’ve misunderstood something. I’m not sure what it is though, I tried to reexplain the concepts which I thought you might be misunderstanding. Could you reexplain why you think it would get you superior performance using the kind of multi period model I was talking about?
Okay, I hadn’t actually experimented with the math on that so I can’t defend DCA as amplifying returns under volatility. So I don’t have much more to say in objection to the result you’ve posted either.
1) I’m not sure what different metrics you though I suggested. To clarify, CAPM and Falkenstein’s model are about returns for a constant portfolio over a given period. If you want to talk about a changing portfolio, you’ll have to approximate this as several time periods each with a different constant portolio and geomtrically average the returns.
1) I care about the investor return, not the asset return or any of the other metrics you listed, because that’s the return I get.
2) I wasn’t suggesting that an investor could buy on the lows. I was saying that the investor could buy in every period, but only an amount that is constant in dollar terms (or in terms of some other risk-free asset). This would then exceed the asset’s average return, though both might be negative.
1) Obviously you’re concered about invstor return (well utility anyway), I never intended to suggested there was any other metric you’d be interested in. Surely our previous conversations should have convinced you I’m not one to make that kind of mistake frequently.
2) Dollar cost averaging gets you something if there’s mean reversion. Otherwise it gains you nothing (might not cost you anything either) for the simple reason that asset prices are random walks. This is a standard result (http://www.moneychimp.com/features/dollar_cost.htm). If you think Falkenstein’s model implies that dollar cost averaging is a superior strategy, then I think you’ve misunderstood something. I’m not sure what it is though, I tried to reexplain the concepts which I thought you might be misunderstanding. Could you reexplain why you think it would get you superior performance using the kind of multi period model I was talking about?
Okay, I hadn’t actually experimented with the math on that so I can’t defend DCA as amplifying returns under volatility. So I don’t have much more to say in objection to the result you’ve posted either.
1) I’m not sure what different metrics you though I suggested. To clarify, CAPM and Falkenstein’s model are about returns for a constant portfolio over a given period. If you want to talk about a changing portfolio, you’ll have to approximate this as several time periods each with a different constant portolio and geomtrically average the returns.