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

Type

Refereed Article

Year

2014

Author(s)

Hubert Dichtl
Wolfgang Drobetz
Martin Wambach

Journal

Financial Markets and Portfolio Management

Volume

28

Pages

209-231

Research Area

Asset Management

Keywords

Rebalancing, stock-bond portfolios, bootstrap, statistical significance

Abstract

This study compares the performance of different rebalancing strategies under realistic market conditions by reporting statistical significance levels.Our analysis is based on historical data from the United States, the United Kingdom, and Germany and comprises three different classes of rebalancing (periodic, threshold, and range rebalancing). Despite cross-country differences, our history-based simulation results show that all rebalancing strategies outperform a buy-and-hold strategy in terms of Sharpe ratios, Sortino ratios, and Omega measures. The differences in risk-adjusted performance are not only statistically significant, but also economically relevant. However, the choice of a particular rebalancing strategy is of only minor economic importance.

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