Where is the value added of rebalancing? A systematic comparison of alternative rebalancing strategies

Testing rebalancing strategies for stock-bond portfolios across different asset allocations

“…Although several studies do report that rebalancing provides a value added for institutional investors (Dichtl, Drobetz, and Wambach 2014), three questions remain unanswered. First of all, there are no studies on rebalancing with a focus on institutional investors outside the United States.…”

“…As all parameters are linked by multiplication (four different classes of rebalancing, three different trading intervals), we only show the risk-adjusted performance and the corresponding confidence intervals for buy-and-hold as well as quarterly periodic rebalancing. Given an initial asset allocation of 60% stocks and 40% government bonds, Dichtl, Drobetz, and Wambach (2014) find that quarterly periodic rebalancing provides the highest riskadjusted performance on average. With respect to all other rebalancing strategies classified in Table 1, the simulation results differ only slightly.…”

“…A recent study by Dichtl, Drobetz, and Wambach (2014) compares different rebalancing strategies (implementing different rebalancing techniques and rebalancing intervals) with the buy-and-hold benchmark using data from the United States, the United Kingdom and Germany. They use a simulation approach and find that all rebalancing strategies outperform the buy-and-hold strategy in terms of Sharpe ratios, Sortino ratios and Omega measures.…”

Factor exposures and diversification: Are sustainably screened portfolios any different?

“…To be able to conduct the regression on each of the bootstrapped samples, the returns of the portfolios and the different factors are bootstrapped in pairs to preserve the relationship (Davison and Kuonen 2002;Fox 2015;Lai and Xing 2008). For this purpose and building upon Dichtl et al (2014) and Ledoit and Wolf (2008), we employ the stationary block bootstrap of Politis and Romano (1994).…”

Performance of Six Sigma Rebalancing for Portfolios Mixing Polar Investment Styles

“…On and off, there emerge studies that compare rebalancing strategies with a conclusion that no universally applicable rebalancing strategy exists (e.g. Dichtl et al, 2014;Lam, 2014;Boďa and Kanderová, 2018). Some enhancements of threshold rebalancing strategies go beyond simple comparisons of weights and include optimizations algorithm that also account for transaction costs and make updates of portfolio composition more sophisticated, posing thus more demands on investing (e.g.…”