The additional return found when rebalancing. In the crypto example, why did the monthly rebalanced portfolio return more than the untouched portfolio? That difference is a premium. And why did the daily rebalanced portfolio return more, than the monthly rebalanced portfolio?
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In a theoretical, frictionless world, probably. In reality, I think you'd bump into a lot of constraints trying to do that. Good trades used to exist like this - shorting inverse/leveraged ETFs for example. Harder now cos borrowing market smarter.
The effect is not to do with the frequency of trading, explicitly.
It's caused by the discrepancy between the weights you want and the weights you have.
Which, as macro states, is a function of the volatility/auto-correlation of your alpha and the assets themselves.
One way to think about this portfolio is ++ short term reversion, - size factor, - trading costs, so if you think that combination is likely to outperform then sure, have at it
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hm isnt size factor the idea that smaller market cap stuff is riskier and should earn higher returns? the rebalanced port leans more toward the small market cap stuff than the unbalanced port, so id think we are long the size factor
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