Portfolio Rebalancing in Theory and Practice
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چکیده
• 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 rebalancing strategy. A portfolio with a short time horizon is less likely to need rebalancing because there is less time for the portfolio to drift from the target asset allocation. In addition, such a portfolio is less likely to recover the trading costs of rebalancing. Author
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