Optimal buy-and-hold strategies for financial markets with bounded daily returns
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.
planning games buy-and-hold trading problems online algorithms dollar averaging strategy balanced strategy competitive analysis minimax theorem linear programming zero-sum two-person games