DIVERSIFICATION, REBALANCING, AND THE GEOMETRIC MEAN FRONTIER

• cours - matière potentielle : action over a chosen number

DIVERSIFICATION, REBALANCING, AND THE GEOMETRIC MEAN FRONTIER William J. Bernstein and David Wilkinson November 24, 1997 Abstract The effective (geometric mean) return of a periodically rebalanced portfolio always exceeds the weighted sum of the component geomet- ric means. Some approximate formulae for estimating this effective return are derived and tested. One special case of these formulae is shown to be particularly simple, and is used to provide easily com- puted estimates of the benefits of diversification and rebalancing.

• geometric means
• individual assets
• variance optimization
• part of the portfolio optimization process
• mean returns
• geometric mean
• mean return
• variance
• portfolio
• period