Skip to main content

Do Threshhold Levels Affect Performance of Portfolio Based On Threshhold Rebalanced Strategy?

I define threshold rebalancing as this: when the market tracking index fund's value is different than the target and the diference is bigger than the threshhold, I rebalance the portfolio. If the stock position has more value, I sell stock and buy otherwise in order to achieve the target allocation ratio. This means the lower the threshhold or the more the stock price flucturates, the more frequent we rebalacnce our portfolio,

Simulator

This simulates the investment restuts of a SPY/Cash portfolio rebalanced with different thresholds. The portfolio starts with $1,000 and SPY initial price is $400.Adjust the cash return to represent short-term bond yield.
Cash Ratio: %
SPY Ratio: %
Mean Monthly Return: %
Monthly Return Standard Deviation: %
Cash Mean Monthly Return: %
Investment Duration: year(s).
Threshold 1: %.
Threshold 2: %.
Threshold 3: %.
Threshold 4: %.

Results Comparison

Total Returns

  • No-rebalanced:0%
  • Rebalanced Monthly:0%
  • Rebalanced Quarterly:0%
  • Rebalanced Semi-annually:0%
  • Rebalanced Annually:0%

Mean Monthly Return

  • No-rebalanced:0%
  • Rebalanced Monthly:0%
  • Rebalanced Quarterly:0%
  • Rebalanced Semi-annually:0%
  • Rebalanced Annually:0%

Monthly Return Standard Deviation

  • No-rebalanced:0%
  • Rebalanced Monthly:0%
  • Rebalanced Quarterly:0%
  • Rebalanced Semi-annually:0%
  • Rebalanced Annually:0%

Sharpe Ratios

Conclusion

Investment Portfolio rebalanced with threshholds almost always has a better Sharpe ratio then the non-rebalanced one. But the threshold levels do not have significant impact on portfolio performance.
Labels:

Comments

Post a Comment

Popular posts from this blog

Which is better? BND or AGG?

The US 10-year treasury yield has reached at 2007-2008 years level, which is about 16 years ago. From a technical point of view, it is a buy. Then there are 2 bond ETFs that I am interested in. There are BND and AGG. They are very similar in nature. US 10 year Treasury Bond, chart, prices - FT.com Expense Ratio BND: 0.03% AGG: 0.03% The same. Turnover Rate BND: 40.00% AGG: 104.0% BNG seems better. Historical Performance Comparison Investment duration: 5 years with no tax on dividends BND wins a little with winning rate of 57.5%, but AGG wins 0.012% in return. Investment duration: 5 years with 30% tax on dividends AGG wins a little with winning rate of 65% and a 0.079% difference on average. Investment duration: 10 years with no tax on dividends AGG wins a little with winning rate of 67% and a 0.024% difference on average. Investment duration: 10 years with 30%  tax on dividends AGG wins a little with winning rate of 99% and a 0.095% difference on average. C...
Post a Comment
Read more