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On the Diversification and Rebalancing Returns: Performance Comparison of Constant Mix versus Buy-and-Hold Strategies

2022; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.4153690

1556-5068

Philippe Bertrand, Jean‐Luc Prigent,

Banking stability, regulation, efficiency

Download This Paper Open PDF in Browser Add Paper to My Library Share: Permalink Using these links will ensure access to this page indefinitely Copy URL On the Diversification and Rebalancing Returns: Performance Comparison of Constant Mix versus Buy-and-Hold Strategies 61 Pages Posted: 24 Jul 2022 See all articles by Philippe BertrandPhilippe BertrandAMGSM-IAE Aix-en-Provence, Aix Marseille University, CERGAM; KEDGE Business School Jean-Luc PrigentUniversity of Cergy-Pontoise - ThEMA Date Written: July 4, 2022 Abstract This paper examines and compares the constant mix and buy-and-hold portfolio strategies. To this end, we examine and illustrate their performances using various criteria such as comparison of their payoffs, basic properties of their return cumulative distribution functions and their performances with respect to Kappa measures. We also introduce the notion of compensating variation to gauge their respective expected utilities. Our study reveals that, even if the constant mix payoff is more often higher than the buy-and-hold payoff (the probability is around 66%, at least in the GBM framework), this superiority is not very significant. Indeed, for example, when the constant mix is preferable, the compensating variation of the buy-and-hold is weak, whereas, when the buy-and-hold, the compensating variation of the constant mix can be very high. Therefore, when buy-and-hold strategy outperforms rebalancing one with respect to an utility function, it is far more significantly. These results are confirmed by the empirical study that we conduct. Keywords: Diversification return; Constant mix portfolio; Buy-and-hold strategy; Compensating variation. JEL Classification: G11, C58, G41 Suggested Citation: Suggested Citation Bertrand, Philippe and Prigent, Jean-Luc, On the Diversification and Rebalancing Returns: Performance Comparison of Constant Mix versus Buy-and-Hold Strategies (July 4, 2022). Available at SSRN: https://ssrn.com/abstract=4153690 Philippe Bertrand AMGSM-IAE Aix-en-Provence, Aix Marseille University, CERGAM ( email ) Chemin de la Quille - PuyricardAix en Provence, 13089France KEDGE Business School ( email ) Domaine de Luminy - BP 921BP 921Marseille, PACA 13288France Jean-Luc Prigent (Contact Author) University of Cergy-Pontoise - ThEMA ( email ) 33 boulevard du port33 bd du PortF-95011 Cergy CEDEXFrance Download This Paper Open PDF in Browser Do you have a job opening that you would like to promote on SSRN? Place Job Opening Paper statistics Downloads 12 Abstract Views 38 PlumX Metrics Related eJournals Investments eJournal Follow Investments eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS 230 PAPERS 2,073 Feedback Feedback to SSRN Feedback (required) Email (required) Submit If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. Submit a Paper Section 508 Text Only Pages SSRN Quick Links SSRN Solutions Research Paper Series Conference Papers Partners in Publishing Jobs & Announcements Newsletter Sign Up SSRN Rankings Top Papers Top Authors Top Organizations About SSRN SSRN Objectives Network Directors Presidential Letter Announcements Contact us FAQs Copyright Terms and Conditions Privacy Policy We use cookies to help provide and enhance our service and tailor content. To learn more, visit Cookie Settings. This page was processed by aws-apollo5 in 0.244 seconds