Because of the Thanksgiving holiday tomorrow, the government released three major economic reports today: income & spending, initial jobless claims, and new orders for durable goods. Overall, the numbers show an economy that continues to struggle. There’s just enough growth in the latest data points to keep the debate open about what happens next, but the macro trend still looks precarious no matter how you spin the numbers.
Daily Archives: November 23, 2011
Research Review | 11.23.2011 | Managing Asset Allocation
Testing Rebalancing Strategies for Stock-Bond Portfolios: Where is the Value Added of a Rebalancing Strategy?
Hubert Dichtl (Alpha Portfolio Advisors), et al. | September 15, 2011
This study addresses the question why institutional investors prefer rebalancing even though these strategies require the selling of a fraction of the better-performing assets and investing the proceeds in the less-performing assets. Analyzing the value added of rebalancing strategies for investors, we document that the return effect is negligible, and hence it is primarily a risk management argument which justifies the widespread use of these strategies. Minimizing risk (defined as return volatility) with respect to a given asset allocation seems to be the primary objective of any rebalancing strategy.