Euro-Area Quantitative Easing and Portfolio Rebalancing

Rebalancing the Euro area: the costs of internal devaluation

Realized portfolio selection in the euro area

A new approach to mean-variance efficient portfolio selection is introduced. The method is based on realized regression theory and the regression based portfolio selection approach of Britten-Jones (1999), yielding a conditional version of the Britten-Jones (1999) method. Some of the noticeable results of the paper are as follows. Firstly, the monetary union may have had a much less important i...

Portfolio Rebalancing in Theory and Practice

• Determining an effective rebalancing strategy is a function of the portfolio’s assets: their expected returns, their volatility, and the correlation of their returns. For example, a high correlation among the returns of a portfolio’s assets means that they tend to move together, which will tend to reduce the need for rebalancing. In addition, the investment time horizon affects the rebalancin...

Capital Gains Taxes and Portfolio Rebalancing

The major friction that investors face in rebalancing their portfolios is capital gains taxes, which are triggered by the sale of assets. In this article, we examine the impact of an investor’s capital gains tax liability and existing risk exposure upon the optimal portfolio and rebalancing decisions. We capture the trade-off over the investor’s lifetime between the tax costs and diversificatio...

Quantitative Easing and Financial Stability∗

The massive expansion of central-bank balance sheets in response to recent crises raises important questions about the effects of such “quantitative easing” policies, both their effects on financial conditions and on aggregate demand (the intended effects of the policies), and their possible collateral effects on financial stability. The present paper compares three alternative dimensions of ce...