You gotta go deeper than that. Why does it appear to do better? Because it keeps risk exposures closer to what you want, rather than what the market have you. Is there a better way to do that than rebalancing on a fixed calendar schedule? Yes.
-
Yeah robot has this right imo. Rebalancing is table stakes, that should be your benchmark (and in many professionally managed portfolios it literally is). Not rebalancing back to target weights is negative alpha.
I agree there is a difference between rebalancing and not rebalancing, and over the long term not rebalancing is worse. But you’re not “earning a premium” you are “avoiding a penalty” (the penalty for being underdiversified). Maybe it’s just semantics.
-
-
In certain contexts rebalancing induces negative convexity but the whole discussion has a distinction-without-a-difference flavour.
-
Yeah, that's fair.
End of conversation
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.