RT Journal Article
SR Electronic
T1 Rebalancing
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 52
OP 57
DO 10.3905/jpm.2003.319883
VO 29
IS 3
A1 Seth J. Masters
YR 2003
UL https://pm-research.com/content/29/3/52.abstract
AB While the power of rebalancing to improve returns and reduce risk is generally acknowledged, there is relatively little work focused on the best way to implement a rebalancing policy. Most rebalancing policies use arbitrary “one size fits all” rules, and the more sophisticated approaches that have been proposed involve complex calculations. The author's simpler methodology allows investors to tailor their rebalancing policies to their risk tolerance, the cost of rebalancing, and the risk characteristics of each asset class in the portfolio. This approach addresses not only when to rebalance, but also how far back to rebalance. The result is a set of easily implemented rules for adhering to a rebalancing discipline.