Investment strategy based on a company growth model

TL;DR

This paper develops an investment strategy based on a company's growth model, estimating income growth and variance from data and simulations, and finds medium-sized companies offer optimal growth with low risk.

Contribution

It introduces a numerical model to evaluate income growth-based investment strategies and identifies medium-sized companies as optimal for asset growth with low risk.

Findings

Medium-sized companies yield the best asset growth.

Investment strategies based on income growth are effective.

Low risk associated with medium-sized company investments.

Abstract

We first estimate the average growth of a company's annual income and its variance by using both real company data and a numerical model which we already introduced a couple of years ago. Investment strategies expecting for income growth is evaluated based on the numerical model. Our numerical simulation suggests the possibility that an investment strategy focusing on the medium-sized companies gives the best asset growth with relatively low risk.