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

Authors:
Gen-Huey Chen;Ming-Yang Kao;Yuh-Dauh Lyuu;Hsing-Kuo Wong
Affiliations:
-;-;-;-
Venue:
SIAM Journal on Computing
Year:
2002

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Abstract

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.