Hu, Xiao. 2015. An
Empirical Performance Evaluation Of Different Portfolio Allocation Strategies.
Doctoral Dissertation, Cornell University.
Incorporating Value
Averaging portfolio construction method with S&P 500 firms' Aggregate
Implied Cost of Capital is an investment strategy that involves undertaking
risks during market recessions and recovering strongly in post-recession
periods. This strategy outperforms a pure Value Averaging strategy, Dollar Cost
Averaging, and Strategic Asset Allocation under different asset class weights
under the performance metrics of Internal Rate of Return, Sharpe Ratio, and
Maximum Drawdown Ratio. When applying different risk-free borrowing caps, Value
Averaging incorporated with Aggregate Implied Cost of Capital results in lower
risks. However, it will not yield better returns unless maximum risk-free
borrowing caps are relaxed. The strategy also requires a longer portfolio
horizon to ensure higher Internal Rate or Return.
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