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Enhanced Portfolio Performance Using a Momentum Approach to Annual Rebalancing

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  • Michael D. Mattei

    (Rubel School of Business, Bellarmine University, 2001 Newburg Road, Louisville, KY 40205, USA)

Abstract

After diversification, periodic portfolio rebalancing has become one of the most widely practiced methods for reducing portfolio risk and enhancing returns. Most of the rebalancing strategies found in the literature are generally regarded as contrarian approaches to rebalancing. A recent article proposed a rebalancing approach that incorporates a momentum approach to rebalancing. The momentum approach had a better risk adjusted return than either the traditional approach or a Buy-and-Hold approach. This article identifies an improvement to the momentum approach and then examines the impact of transactions costs and taxes on the portfolio performance of four active rebalancing approaches.

Suggested Citation

  • Michael D. Mattei, 2018. "Enhanced Portfolio Performance Using a Momentum Approach to Annual Rebalancing," IJFS, MDPI, vol. 6(1), pages 1-9, February.
    • Handle: RePEc:gam:jijfss:v:6:y:2018:i:1:p:15-:d:129701
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    References listed on IDEAS

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    1. Cheng, Pao Lun, 1971. "Efficient Portfolio Selections beyond the Markowitz Frontier," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 6(5), pages 1207-1234, December.
    2. Hubert Dichtl & Wolfgang Drobetz & Martin Wambach, 2016. "Testing rebalancing strategies for stock-bond portfolios across different asset allocations," Applied Economics, Taylor & Francis Journals, vol. 48(9), pages 772-788, February.
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    Cited by:

    1. Sherif, Mohamed & Chen, Jiaqi, 2019. "The quality of governance and momentum profits: International evidence," The British Accounting Review, Elsevier, vol. 51(5).

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