Buy-and-Hold vs. Constantly Rebalanced Portfolios: A Theoretical Comparison

Journal of Asset Management, Volume 16, Issue 2 (March 2015)

Posted: 3 Dec 2014 Last revised: 20 Jan 2016

See all articles by Florin Spinu

Florin Spinu

affiliation not provided to SSRN

Date Written: December 2, 2014

Abstract

This paper compares the return distributions of the Buy-and-Hold and the Constantly Rebalanced portfolios over a fixed time window. The former has always the greater expected return, while at the same time it has a provably larger larger variance in at least two cases: when the underlying assets have equal expected returns or when the portfolio weights are mean-variance optimal.

Keywords: rebalancing gains, buy and hold, geometric Brownian motion

Suggested Citation

Spinu, Florin, Buy-and-Hold vs. Constantly Rebalanced Portfolios: A Theoretical Comparison (December 2, 2014). Journal of Asset Management, Volume 16, Issue 2 (March 2015). Available at SSRN: https://ssrn.com/abstract=2533198 or http://dx.doi.org/10.2139/ssrn.2533198

Florin Spinu (Contact Author)

affiliation not provided to SSRN

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