Testing Rebalancing Strategies for Stock-Bond Portfolios Across Different Asset Allocations
24 Pages Posted: 13 Aug 2014
Date Written: August 12, 2014
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 in-corporates the financial markets of the United States, the United Kingdom, and Germany. To draw reasonable recommendations to investment management, we implement a history-based simulation approach which enables us to mimic realistic market conditions. If the portfolio weight of stocks exceeds 30%, our empirical results show that a frequent rebalancing significantly enhances risk-adjusted portfolio performance for all analyzed countries and all risk-adjusted performance measures.
Keywords: rebalancing, stock-bond portfolio, bootstrap, statistical inference
JEL Classification: G12, G15
Suggested Citation: Suggested Citation