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Abstract:
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In portfolio management, rebalancing is widely used to maintain the target asset allocations. We start from analyzing the return-risk profiles of two-assets portfolios with periodic or threshold or periodic monitoring strategies, and prove the existence of rebalancing benefits, say, risk controlling, rebalancing bonus, etc. We also try to answer an important question: when and how the rebalancing benefits can be achieved. At last, it is emphasized that rebalancing should be taken into considerations before the target asset allocations are decided, which is often ignored by most investors.
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