A frequent rebalancing strategy is like selling straddles. Alternatively, trend-following is similar to buying straddles. Hence, incorporating a trend component with rebalancing will change the portfolio return convexity. There may be a middle ground whereby rebalancing is done in conjunction with following trends. This may allow the best of both strategies. If markets are trending, delay rebalancing. If they are not trending, follow a regular rebalancing schedule.I like it, but what signal or signals for the trend, Mark?
Retirement Finance; Alternative Risk; The Economy, Markets and Investing; Society and Capital
Apr 30, 2019
The trade-offs and interaction between rebalancing and trend-following
From "Bending the return curve with rebalancing using trend-following," by Mark Rzepczynski at Disciplined Systematic Global Macro Views http://mrzepczynski.blogspot.com
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