Automated portfolio rebalancing: Automatic erosion of investment performance?

Artikel

Robo-advisers enable investors to establish an automated rebalancing strategy for a portfolio usually consisting of stocks and bonds. Since households’ portfolios additionally include further frequently tradable assets like real estate funds, articles of great value and cash(-equivalents), we analyze whether households would benefit from a service that automatically rebalances a portfolio which additionally includes the latter assets. In contrast to previous studies, this paper relies on real-world household portfolios, which are derived from the German central bank’s (Deutsche Bundesbank) Panel on Household Finances (PHF)-Survey. We compute the portfolio performance increase/decrease that households would have achieved by employing rebalancing strategies instead of a buy-and-hold strategy in the period from September 2010 to July 2015 and analyze whether subsamples of households with certain sociodemographic and socioeconomic characteristics would have benefited more from portfolio rebalancing than other household subsamples. The empirical analysis shows that the analyzed German households would not have benefited from an automated rebalancing service and that no subgroup of households would have significantly outperformed another subgroup in the presence of rebalancing strategies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Asset Management ; ISSN: 1479-179X ; Volume: 21 ; Year: 2020 ; Issue: 6 ; Pages: 489-505 ; London: Palgrave Macmillan UK

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance ; Portfolio Choice; Investment Decisions ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡
• Subject: Household finance ; Robo-advisor ; Portfolio rebalancing ; Fixed-weight asset strategy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Horn, Matthias ; Oehler, Andreas
• Event: Veröffentlichung
• (who): Palgrave Macmillan UK
• (where): London
• (when): 2020

Further information

• DOI: doi:10.1057/s41260-020-00183-0
• Last update: 31.03.2023, 9:01 AM CEST