Testing Rebalancing Strategies for Stock-Bond Portfolios Across Different Asset Allocations

24 Pages Posted: 13 Aug 2014

See all articles by Hubert Dichtl

Hubert Dichtl

dichtl research & consulting GmbH

Wolfgang Drobetz

Hamburg University

Martin Wambach

University of Hamburg

Date Written: August 12, 2014

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 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

Dichtl, Hubert and Drobetz, Wolfgang and Wambach, Martin, Testing Rebalancing Strategies for Stock-Bond Portfolios Across Different Asset Allocations (August 12, 2014). Available at SSRN: https://ssrn.com/abstract=2479384 or http://dx.doi.org/10.2139/ssrn.2479384

Hubert Dichtl

dichtl research & consulting GmbH ( email )

Am Bahnhof 7
65812 Bad Soden am Taunus
Germany

HOME PAGE: http://www.dichtl-rc.de

Wolfgang Drobetz (Contact Author)

Hamburg University ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Martin Wambach

University of Hamburg ( email )

Von-Melle-Park 5
Hamburg, 20146
Germany

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