What Makes the Dollar Cost Averaging Strategy So Popular Today? A Critical Review of the Benefits and Risks of a Controversial Investment Scheme

IF 0.6 Q4 BUSINESS, FINANCE Journal of Investing Pub Date : 2023-08-04 DOI:10.3905/joi.2023.1.281

François Marchessaux, Mathieu Vaissié

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Abstract

The dollar-cost averaging (DCA) strategy is an enigma. Proven suboptimal from a risk-adjusted performance time and again since the late 1970s, it is nevertheless more popular today than ever. Our empirical analysis makes no exception. The DCA strategy does almost systematically show a lower level of volatility than the so-called lump sum investing (LSI) strategy, but there is no free lunch. The price to pay is a significantly lower level of return, leading more often than not to lower Sharpe ratios. Yet, the DCA strategy has its merit. It prevents investors from giving free reins to their “animal spirits” and paves the way of least resistance to build up an estate. This being said, recent developments shed a new light on the DCA strategy, and suggest that the liquidity profile of its order flow could very well be the key driving factor of its success today. The collateral effect is that retail investors looking for an efficient way to securely build up positions in risky assets could finally end up with more risks than they think/feel, and possibly than they can really stand. Caveat emptor.

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是什么让美元成本平均策略在今天如此流行？一个有争议的投资方案的收益和风险的批判性评论

美元成本平均(DCA)策略是一个谜。自20世纪70年代末以来，风险调整后的业绩一次又一次被证明不是最优的，但如今却比以往任何时候都更受欢迎。我们的实证分析也不例外。DCA策略确实几乎系统地显示出比所谓的一次性投资(LSI)策略更低的波动水平，但天下没有免费的午餐。付出的代价是显著降低的回报水平，往往会导致夏普比率下降。然而，DCA策略也有其优点。它可以防止投资者自由支配他们的“动物精神”，并为建立房地产铺平了阻力最小的道路。话虽如此，最近的事态发展揭示了DCA战略的新亮点，并表明其订单流的流动性状况很可能是其今天成功的关键驱动因素。附带效应是，寻求有效方式安全地建立风险资产头寸的散户投资者最终可能面临比他们想象/感觉的更大的风险，甚至可能超出他们真正能够承受的风险。购者自慎。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Investing BUSINESS, FINANCE-

CiteScore

1.10

自引率

16.70%

发文量