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When to efficiently rebalance a portfolio

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  • Masayuki Ando
  • Masaaki Fukasawa

Abstract

A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing under a general multi-dimensional Brownian semimartingale model of asset prices. In a high-frequency asymptotic framework, we derive an asymptotically efficient sequence of simple predictable strategies.

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  • Masayuki Ando & Masaaki Fukasawa, 2023. "When to efficiently rebalance a portfolio," Papers 2308.08745, arXiv.org.
    • Handle: RePEc:arx:papers:2308.08745
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    References listed on IDEAS

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    1. Yacine Aït-Sahalia & Jean Jacod, 2014. "High-Frequency Financial Econometrics," Economics Books, Princeton University Press, edition 1, number 10261.
    2. Ogasawara, Haruhiko, 2017. "Extensions of Pearson’s inequality between skewness and kurtosis to multivariate cases," Statistics & Probability Letters, Elsevier, vol. 130(C), pages 12-16.
    3. Holger Kraft & Thomas Seiferling & Frank Thomas Seifried, 2017. "Optimal consumption and investment with Epstein–Zin recursive utility," Finance and Stochastics, Springer, vol. 21(1), pages 187-226, January.
    4. C. Atkinson & P. Wilmott, 1995. "Portfolio Management With Transaction Costs: An Asymptotic Analysis Of The Morton And Pliska Model," Mathematical Finance, Wiley Blackwell, vol. 5(4), pages 357-367, October.
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