Footnote:
In: Journal of Financial Counseling and Planning, Vol. 16, No. 2, 2005
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 2005 erstellt
Description:
Merton (1969) established the conditions under which a constant mix portfolio strategy is optimal across a multi-period investment horizon. A central tenant of Merton's paper is that the investor's portfolio must be rebalanced continuously. In practice, portfolios are not rebalanced continuously, especially by individual investors. As portfolios are rebalanced less frequently the asset mix will drift from the target weights of the constant mix strategy and lower investor utility. We measure this 'drift' indirectly by measuring the difference between the investor's level of risk aversion and the risk aversion that would make the non-rebalanced portfolio an optimal choice