Testing Rebalancing Strategies for Stock-Bond Portfolios: What is the Optimal Rebalancing Strategy?
نویسندگان
چکیده
منابع مشابه
optimal Rebalancing for Institutional Portfolios
WtNTER 2006 I nstitutional money managers develop risk models and optimal portfolios to match a desired risk/reward profile. Utility functions express risk preferences and implicitly reflect the views of fund trustees or directors. Once a manager determines a target portfolio, maintaining this balance of assets is non-trivial. A manager must rebalance actively because different asset classes ca...
متن کاملOptimal Rebalancing Strategy Using Dynamic Programming for Institutional Portfolios
Institutional fund managers generally rebalance using ad hoc methods such as calendar basis or tolerance band triggers. We propose a different framework that quantifies the cost of a rebalancing strategy in terms of risk-adjusted returns net of transaction costs. We then develop an optimal rebalancing strategy that actively seeks to minimize that cost. We use certainty equivalents and the trans...
متن کاملOptimal Rebalancing of Portfolios with Transaction Costs
Rebalancing of portfolios with a concave utility function is considered. It is proved that transaction costs imply that there is a no-trade region where it is optimal not to trade. For proportional transaction costs it is optimal to rebalance to the boundary when outside the no-trade region. With flat transaction costs, the rebalance from outside the no-trade region should be to an internal sta...
متن کاملOptimal Derivative Strategies with Discrete Rebalancing
Optimal asset allocation strategies are often derived in continuous time models, but have to be implemented in discrete time. It has been shown that in models with stochastic volatility or jumps, an investor who just uses the continuous time strategy in discrete time has to trade at least daily to profit from having access to derivatives. In this paper, we determine the optimal investment strat...
متن کاملOptimal Rebalancing: A Scalable Solution
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. We apply a quadratic heuristic to address the optimal rebalancing problem, and we compare it to a dynamic programmin...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2012
ISSN: 1556-5068
DOI: 10.2139/ssrn.2139915