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Enhancing Portfolio Rebalancing Efficiency Using Binomial Distribution: A Case Study of Beating the Nifty Index with good CAGR

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  • Chaudhari, Saurav L.

    (HTNP Industries)

Abstract

This paper explores the application of the Binomial Distribution Theorem in optimizing portfolio rebalancing strategies to outperform the Nifty Index. A model based on the Binomial distribution is proposed for identifying entry and exit points in stocks, aiming for a 30\% Compound Annual Growth Rate (CAGR). Our empirical analysis demonstrates that by systematically applying this technique, portfolio managers can significantly enhance returns while maintaining risk levels comparable to the benchmark index. This method shows potential for outperforming traditional rebalancing strategies. Extensions of this theorem, including Monte Carlo simulations and Black-Scholes adjustments, are incorporated to further refine the model and enhance its effectiveness.

Suggested Citation

  • Chaudhari, Saurav L., 2024. "Enhancing Portfolio Rebalancing Efficiency Using Binomial Distribution: A Case Study of Beating the Nifty Index with good CAGR," OSF Preprints u5q97, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:u5q97
    DOI: 10.31219/osf.io/u5q97
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    References listed on IDEAS

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    1. Kenneth R. French, 2008. "Presidential Address: The Cost of Active Investing," Journal of Finance, American Finance Association, vol. 63(4), pages 1537-1573, August.
    2. Diego Vallarino, 2024. "Dynamic Portfolio Rebalancing: A Hybrid new Model Using GNNs and Pathfinding for Cost Efficiency," Papers 2410.01864, arXiv.org.
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