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

Type

Working Paper

Institution(s)

University of Hamburg

Year

2014

Author(s)

Hubert Dichtl
Wolfgang Drobetz
Martin Wambach

Research Area

Asset Management

Keywords

Portfolio management, rebalancing

Abstract

We compare the risk-adjusted performance of stock-bond portfolios between rebalancing and buy-and-hold across different asset allocations by reporting statistical significance levels. Our investigation is based on a 30-year dataset and incorporates the financial markets of the United States, the United Kingdom, and Germany. To draw reasonable recommendations to investment management, we implement a history-based simulation approach which enables us to mimic realistic market conditions. If the portfolio weight of stocks exceeds 30%, our empirical results show that a frequent rebalancing significantly enhances risk-adjusted portfolio performance for all analyzed countries and all risk-adjusted performance measures.

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