Portfolio Rebalancing

Edward Qian is a Chief Investment Officer with PanAgora Asset Management. He has research experience and expertise in quantitative investing, portfolio theory, and asset allocation. He is the co-author of the bestselling book, Quantitative Equity Portfolio Management: Modern Techniques and Applications.

ContentsPreface, viiChapter 1 ¿ Introduction 11.1 RISK MANAGEMENT 11.2 REBALANCING ALPHA 21.3 DIVERSIFICATION RETURN, VOLATILITY EFFECT 31.4 SERIAL CORRELATION AND REBALANCING ALPHA 51.5 NEW TOPICS IN PORTFOLIO REBALANCING 61.6 OUTLINE OF THE BOOK 7Chapter 2 ¿ A Brief Review of Portfolio Theory 92.1 ARITHMETIC AND GEOMETRIC MEANS 92.2 RETURN VOLATILITIES 112.3 RELATIONSHIPS BETWEEN ARITHMETIC ANDGEOMETRIC MEANS 132.3.1 Analytic Approximation 132.3.2 Empirical Examination 152.4 PORTFOLIO RETURN AND VOLATILITY 192.5 SERIAL CORRELATION AND VOLATILITY OF MULTIPERIODRETURNS 232.5.1 Single Asset Multi-Period Volatility 242.5.2 Portfolio Multi-Period Volatility 26PROBLEMS 27K26247.indb 5 14-09-2018 17:22:11Chapter 3 ¿ Portfolio Rebalancing 293.1 SIMPLE EXAMPLES 293.2 REBALANCING LONG-ONLY PORTFOLIOS 323.3 REBALANCING LONG-SHORT PORTFOLIOS 363.4 REBALANCING ALPHA 413.4.1 Rebalancing Alpha of Asset Allocation Portfolios 423.4.2 Periodic Rebalancing versus Threshold Rebalancing 46PROBLEMS 47Chapter 4 ¿ Volatility Effect and Return Effect 494.1 DEFINITIONS OF TWO EFFECTS 504.2 POSITIVE RETURN EFFECT OF LONG-ONLYPORTFOLIOS 524.2.1 Jensen’s Inequality 524.2.2 Return Effect of Long-Only Portfolios 534.3 POSITIVE VOLATILITY EFFECT OF LONG-ONLYPORTFOLIOS 534.3.1 Cauchy’s Inequality 544.3.2 A Two-Asset Two-Period Case 544.3.3 An M-Asset Two-Period Case 574.3.4 The General Case 584.4 CASES OF POSITIVE AND NEGATIVE REBALANCINGALPHAS 614.4.1 The Case of Positive Rebalancing Alpha 614.4.2 The Case of Negative Rebalancing Alpha