Does anyone have a reference to a detailed mathematical analysis of the process of dollar cost averaging and whether it is really beneficial?

This question isn't detailed enough.


It is beneficial when compared to buying a fixed number of shares. Here's an introductory analysis. In summary, cost averaging yields the harmonic mean of the entry prices. The resulting cost basis is biased towards the lower outliers. The beneficial effects are more noticeable as volatility increases.

  • I think that's exactly what I'm looking for. – DJClayworth Mar 22 '11 at 19:39
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    +1 An introductory article that uses calculus? Great for "detailed mathematical analysis", bad for my brain... – bstpierre Mar 22 '11 at 19:41
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    Nice article, but note, it compares equal dollar purchases vs equal number of shares. Not lump sum. – JoeTaxpayer Jan 8 '13 at 1:13
  • @JoeTaxpayer but it still provides a good framework to think about how DCA works. Thanks! – zsljulius Oct 18 '13 at 17:10

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