Analytical solutions of optimal portfolio rebalancing

Ding Liu

Quantitative Finance, 2019, vol. 19, issue 4, 683-697

Abstract: We study optimal portfolio rebalancing in a mean-variance type framework and present new analytical results for the general case of multiple risky assets. We first derive the equation of the no-trade region, and then provide analytical solutions and conditions for the optimal portfolio under several simplifying yet important models of asset covariance matrix: uncorrelated returns, same non-zero pairwise correlation, and a one-factor model. In some cases, the analytical conditions involve one or two parameters whose values are determined by combinatorial, rather than numerical, algorithms. Our results provide useful and interesting insights on portfolio rebalancing, and sharpen our understanding of the optimal portfolio.

Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2018.1520394 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:19:y:2019:i:4:p:683-697

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2018.1520394

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().