增強成本平均法的有效性﹔來自中國基金市場的證據

Abstract

Dollar Cost-Averaging (DCA) is a popular investment method in China's fund industry, used by more than one-third of mutual fund investors. Originating in the U.S. and first proposed by the Vanguard Group in 1987, DCA allows investors to purchase investment instruments (e.g., stocks, funds, etc.) at regular intervals for the same amount of money. By investing at regular intervals, investors are able to diversify the risk of market volatility, as the price of the shares they purchase may fluctuate in different market conditions. DCA fits the concept of long-term investment, helping to build assets over time and reduce short-term losses due to market volatility. Investors who utilize DCA do not need to be overly concerned about market fluctuations because the amount invested is fixed, helping to maintain emotional stability and prevent decisions from being influenced by short-term market fluctuations. With the boom of the mutual fund industry in the U.S., fund practitioners developed Enhanced Dollar Cost-Averaging (EDCA) based on DCA. EDCA helps investors better capitalize on market opportunities by increasing the amount of money invested when the market performs poorly and decreasing the amount of money invested when the market performs well. market opportunities. This strategy is designed to optimize investment performance under different market conditions, and EDCA is also essentially a countercyclical investment strategy. The dynamic nature of EDCA makes it more adaptable to changing market conditions, helping to control investment risk more proactively and reduce portfolio volatility.

However, the financial community has not yet agreed on the effectiveness of DCA and EDCA. First, DCA assumes that investors are unable to make correct timing decisions at high and low points in the market, and under Market Efficiency, DCA can compensate for investors' deficiencies in judgment by adopting a timed investment approach. However, more and more evidence has recently challenged the efficient market hypothesis, and when market anomalies can predict future returns, the effectiveness of DCA should be treated differently. In terms of opportunity costs, some scholars have argued that a one-time buy may result in lower prices at market lows, and that DCA investments may miss these opportunities. In the case of EDCA, the controversy centers on the ability of investors to accurately predict market performance in order to effectively adjust the amount invested. The complexity of the market makes accurate short-term forecasting difficult, and some scholars are concerned that EDCA may lead to over-trading, and that frequent adjustments to the amount invested may increase transaction costs and negatively affect investors' overall returns. The effectiveness of EDCA may vary in different market environments. Dynamic adjustment of EDCA may be riskier under extreme market volatility.

This study takes a simulated investment in Chinese public funds using DCA and EDCA strategies using Chinese public fund data from 2002 to 2022 to confirm the effectiveness of the use of DCA and EDCA strategies in the Chinese fund market. This study innovatively changes the core idea of EDCA from the original "counter-cyclical" investment strategy to a "pro-cyclical" investment strategy, i.e., sell when the previous position is losing and buy when the previous position is gaining. This change makes EDCA consistent with the Momentum Factor strategy. This study also innovatively proposes the DEDCA (Dynamics EDCA) strategy, that is, when the position is added to the financing tool, EDCA's strategy judgment of the purchase amount is limited to the maximum cash holdings, but DEDCA can be at the market rate of interest rate loan cash and then buy the asset; similarly, when holding excess cash can also be obtained when the interest rate generated by the market rate. In order to demonstrate the effectiveness of long-term investing, this study creates one-, three-, and five-year holding periods for the DCA, EDCA, and DEDCA strategies. Finally, this paper also examines the impact of fund characteristics, such as fund type, fund investment style, and management fee rates, on the returns and risks generated by DCA, EDCA, and DEDCA and the three holding periods. It is found that the EDCA and DEDCA strategies beat the DCA strategy in terms of a number of strategy end-value variables, that the long-term investment strategy helps to control risk, and that the fund investment style has no effect on the return and risk of the strategy under the long-term investment strategy.

The fixed-term strategy fits well with the characteristics of China's fund market. China's fund industry offers a diverse range of fund products, including stock funds, bond funds, and hybrid funds, etc. Moreover, the volatility of China's stock market and fund market is high, and it is difficult for investors to accurately predict the ups and downs of the market. The innovative strategies in this study are expected to play a role and shine in China's fund industry.

Date of Award	27 Feb 2024
Original language	Chinese (Traditional)
Awarding Institution	City University of Hong Kong
Supervisor	Junbo WANG (Supervisor)