Abstract
An advantage of adopting multiperiod portfolio models is improved investment performance via the fixed mix rule. Owing to its similarity to the “buy low/sell high” strategy, it is often misunderstood that it requires mean-reverting processes for the assets. We show that mean reversion is not necessary to benefit from the fixed mix rule, via a simple multidimensional geometric Brownian motion. We also list successful examples from the domain of equities, commodity futures, alternative investments, and momentum strategies.
| Original language | English (US) |
|---|---|
| Title of host publication | Encyclopedia of Quantitative Finance |
| Publisher | wiley |
| Pages | 1-4 |
| Number of pages | 4 |
| ISBN (Electronic) | 9780470061602 |
| ISBN (Print) | 9780470057568 |
| DOIs | |
| State | Published - Jan 1 2010 |
All Science Journal Classification (ASJC) codes
- General Economics, Econometrics and Finance
- General Business, Management and Accounting
Keywords
- dynamic diversification
- fixed mix
- multiperiod models
- portfolio management
- rebalanced portfolios
- rebalancing gains
- volatility pumping
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