When to efficiently rebalance a portfolio

Masayuki Ando and Masaaki Fukasawa

Quantitative Finance, 2024, vol. 24, issue 9, 1235-1245

Abstract: A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing under a general multi-dimensional Brownian semimartingale model of asset prices. In a high-frequency asymptotic framework, we derive an asymptotically efficient sequence of simple predictable strategies.

Date: 2024
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DOI: 10.1080/14697688.2024.2371479

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