| Summary: | 碩士 === 國立臺灣大學 === 財務金融學系 === 85 === Title of Thesis :Empirical study on the relationship between
investment horizon and Risk Diversification Name
of Institute : Graduate School of Finance, National Taiwan
University Graduate Date : June, 1997 Degree Conferred : Master
of Business Administration Name of Student : Lin Cheng-ju
Advisor : Dr. Yang Chau-chen Abstract: There is still a
controversy on the relationship between investment horizon and
risk. It''s commonly believed that time will diversify risk. In
other words, the longer the holding period, the better the
investment performances are. However, some academicians argue
that time diversificationwill not work. The performance of
Dollar Cost Averaging(DCA) policy is the othertopic of this
paper. When investors make a large commitment to the stock
market,the intuitive appeal of DCA seems to be the promise of
preventing entry into market at an stupid time. But academic
papers show different opinions of whichis the better investment
policy between DCA and Lump-Sum(LS)investing. Different
arguments come from different definitions of risk and study
methods. The purpose of this paper is to take those arguments
into account andclassfy them first. Besides, market and
simulation data is considered to investgate the relationship
between investment horizon and risk diversification and the
performance of DCA and LS. The results show:(1) When we define
investment risk as shortfall risk, means the
underperformanceprobability that stock market value below the
time deposit at the end of the investment horizon. In the past
Taiwan stock market, it shows that investment horizon is
negative related to shortfall risk.(2)Taking DCA as a policy,
there is still a negative relationship between holding periods
and risk in taiwan stock market.(3)LS policy is superior to DCA
investment policy, in spite of the common ratesreturn of DCA''s
idle funds in Taiwan and USA stock market. But as far as
Japanmarket is conserned, Ls performs better than DCA only when
DCA idle fund earns a year rate of return under 6%, the
simulation''s data shows the same results.
This study''s results imply that it would be better to invest
idlemoney for long time in an growing stock market. The other
implication suggests that LS generally is a better policy in
growing or random walk market than DCA.
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