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

Hubert Dichtl, Wolfgang Drobetz and Martin Wambach

Applied Economics, 2016, vol. 48, issue 9, 772-788

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.

Date: 2016
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Citations: View citations in EconPapers (17)

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DOI: 10.1080/00036846.2015.1088139

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