If you search with Google "Value Averaging", you're swamped with dozens of web pages which explain how it works, why lump-sum investing is better and why not, template Excel sheets and so forth.

So I will not waste space by explaining what VA is.

From a broader perspective, VA is just another mean-reverting strategy, like following the Delta of a short Put can be in the sense that it's a scheme which tells you when and how much of your total wealth you should invest to have some payoff.

From a closer perspective, everything about VA revolves around a so-called "value path", that is, a time series which tells you what the value of your portfolio should be at every time.

As this is a time series entirely made up by the investor, it might have every possible shape: whilst educational material often suggests flat annual growth rate (and possible enhancement by making this growth rate time-dependent), this seems too simplistic in a quantitative world where we could use every possible machinery taken from stochastic processes, econometrics, machine learning and so forth.

So my question is: do you know what are the most advanced developments on this theme produced so far by researchers and/or practitioners?

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    $\begingroup$ Wondering if value averaging can be related to "vol pumping" (i.e., “diversify and rebalance”) a-la Claude Shannon's Demon. See: quant.stackexchange.com/questions/38473/…? $\endgroup$ – David Addison Mar 23 '18 at 21:20
  • $\begingroup$ @DavidAddison, it definitely can. As I said, they all belong to the collection of mean reverting strategies, i.e. those strategies which try to buy at "low" prices and sell at "high" prices exploiting bounces (instead of riding a trend). VA is the same as volatility pumping but with a predetermined allocation scheme called "value path". Even the option Delta is an allocation scheme for the replicating portfolio, and if you're short Gamma it's just a more advanced volatility pumping machinery. But I'm still wondering why we should follow a linear value path and not, say, a parabolic one. $\endgroup$ – Lisa Ann Mar 24 '18 at 14:09

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