Optimal Rebalancing Frequencies for Multidimensional Portfolios

Johannes Muhle-Karbe, Ibrahim Ekren and Ren Liu
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Johannes Muhle-Karbe: ETH Zurich and Swiss Finance Institute
Ibrahim Ekren: ETH Zurich
Ren Liu: ETH Zurich

No 15-44, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We study optimal investment with multiple assets in the presence of small proportional transaction costs. Rather than computing an asymptotically optimal no-trade region, we optimize over suitable trading frequencies. We derive explicit formulas for these and the associated welfare losses due to small transaction costs in a general, multidimensional diffusion setting, and compare their performance to a number of alternatives using Monte Carlo simulations.

Keywords: transaction costs; optimal trading frequency; optimal investment; multiple assets (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-10
New Economics Papers: this item is included in nep-cmp
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1544

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