Growth Optimal Investment Strategy Efficacy: An Application on Long Run Australian Equity Data
- Topics:
- Equity,
- Investment Strategy
- Tags:
- Finance,
- Growth,
- Investment,
- Investment Strategy,
- Productivity,
- Technique,
- University Of Technology Sydney
- Source:
- University of Technology Sydney
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Overview: A number of investment strategies designed to maximise portfolio growth are tested on a long run Australian equity data set. The application growth optimal portfolio techniques produce impressive rates of growth, despite the fact that the assumptions of normality and stability that underlie the growth optimal model are shown to be inconsistent with the data. The paper introduces a variant of ridge regression to form the basis of one of the growth optimal strategy techniques. The ridge growth optimal technique overcomes the problem of numerically unstable portfolio weights. For short-sales not allowed growth portfolios, the use of the ridge estimator produces increased diversification in the growth portfolios.
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Format: PDF | Size: 426KB | Date: May 2002 | Pages: 43
