Mean-Variance Portfolio Rebalancing with Transaction Costs∗
نویسنده
چکیده
Transaction costs can make it unprofitable to rebalance all the way to the ideal portfolio. A single-period analysis using mean-variance theory provides many interesting insights. With fixed or variable costs, there is a non-trading region within which trading does not pay. With only variable costs, any trading is to the boundary of the non-trading region, while fixed costs induce trading to the interior. With costly trading in futures and underlying, it might be optimal to use a synthetic equity strategy or an asymmetric futures overlay strategy that takes better advantage of extra expected return than traditional futures overlays.
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