Portfolio Rebalancing: A Test of the Markowitz-Van Dijk Heuristic

MIT Sloan School of Management MIT Sloan Working Paper 4641 - 07 March 2007 Portfolio Rebalancing : A Test of the Markowitz - van Dijk Heuristic

Institutional investors usually employ mean-variance analysis to determine optimal portfolio weights. Almost immediately upon implementation, however, the portfolio's weights become sub-optimal as changes in asset prices cause the portfolio to drift away from the optimal targets. In an idealized world without transaction costs investors would rebalance continually to the optimal weights. In the...

Markowitz Portfolio Rebalancing with Turnover Monitoring

Portfolio management starts with asset allocation. There is a consensus that asset allocation plays an important role in determining portfolio performance (Arshanapalli, Coggin & Nelson, 2001). Active portfolio management implies the rebalancing of the existing portfolio by buying and selling assets. The aim of rebalancing is to improve the performance of the managed portfolio by adjusting it t...

Hylke van Dijk Democratic processing

02-Van Dijk-Ch02.qxd

Several concepts are available to indicate the type of society that evolves under the influence of the use of information and communication technology. The most popular concept is the information society. In this book that concept is used in combination with the concept network society to typify contemporary developed and modern societies marked by a high level of information exchange and use o...

Asymptotic Distribution of the Markowitz Portfolio

The asymptotic distribution of the Markowitz portfolio, Σ̂μ̂, is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to heteroskedasticity and autocorrelation of moments up to order four. As a side effect, one can estimate the proportion of error in the Markowitz portfolio du...