Do Investors Benefit from DCA? Evidence from the Stock Exchange of Thailand

Authors

  • Kanin Anantanasuwong Mahidol University
  • Sirithida Chaivisuttangkun Mahidol University

Keywords:

Investment, Investing Strategy, Asset Allocation, Risk Management, Dollar-cost-average

Abstract

This study empirically evaluates the effectiveness of dollar cost averaging (DCA) and its alternative strategies in the Thai stock market both in term of mean variance efficiency and downside risk. With one-year investment horizon, we find that, despite being less risky, DCA strategy is inferior to other alternatives such as lump sum and asset allocation in term of Sharpe ratio. The result regarding downside risk, measured by Sortino ratio, is inconclusive as the ratio for DCA has a higher mean but lower median than lump sum and asset allocation. Finally, we create indices that reflect the wealth investing in each of the strategy. Over our sample period, while DCA leads to a less value of terminal wealth, it fails to prevent the investor’s wealth from a huge loss during the 2008 financial crisis. This failure may be due to the seasonality of the returns in the stock market.

Author Biographies

Kanin Anantanasuwong, Mahidol University

College of Management

Sirithida Chaivisuttangkun, Mahidol University

International College

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Published

2019-06-26

How to Cite

Anantanasuwong, K., & Chaivisuttangkun, S. (2019). Do Investors Benefit from DCA? Evidence from the Stock Exchange of Thailand. Creative Business and Sustainability Journal, 41(2), 84–101. Retrieved from https://so01.tci-thaijo.org/index.php/CBSReview/article/view/198086

Issue

Vol. 41 No. 2: ISSUE 160, APRIL - JUNE 2019

Section

Research Articles

License

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