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

Type

Refereed Article

Year

2016

Author(s)

Hubert Dichtl
Wolfgang Drobetz
Martin Wambach

Journal

Applied Economics

Volume

48

Pages

772-788

Research Area

Asset Management 

Keywords

Rebalancing, stock–bond portfolio, bootstrap, statistical inference

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 useful recommendations to investment management, we implement a history-based simulation approach which enables us to mimic realistic market conditions. Even if the portfolio weight of stocks is very low, our empirical results show that a frequent rebalancing significantly enhances risk-adjusted portfolio performance for all analysed countries and all risk-adjusted performance measures.

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