Journal of Investment Strategies

Risk.net

A consistent investment strategy

Xianzhe Chen and Weidong Tian

  • The proposed strategy has capital protection and low volatility feature.
  • The strategy displays an upward trend regardless of the underlying index movement.
  • The strategy delivers consistent and stable return.

This paper introduces a consistent performance strategy (CPS), which, if followed, leads to a portfolio having consistently positive returns over time and exhibiting a steady upward trend. This strategy is inspired by moving average trading rules in classical technical analysis and is shown to be optimal in a modern dynamic portfolio choice framework. We illustrate our strategy via both simulation (model) and walk- forward testing (market data).

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