A Simulation Model for Deciding Between Lump-Sum and Dollar-Cost Averaging

Abeysekera, Sarath R.; Rosenbloom, E. S.
June 2000
Journal of Financial Planning;Jun2000, Vol. 13 Issue 6, p86
Academic Journal
This article cites a study which developed a Monte Carlo simulation model to help an investor decide between a lump-sum investment strategy (LS) and a dollar-cost averaging (DCA) investment strategy. The purpose of the study is to demonstrate that the choice between DCA and LS methods must be based on the distributional properties of the outcome expected by the investor at the time of initial investment. The authors of the study asserted that a computer simulation model could be a valuable tool in making the decision between two strategies. They suggest that the choice between the two strategies should be conditioned by the risk/return trade-offs from the investor's perspective.


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