In addition to determining buy-sell frequency, rebalancing is essential for maintaining the portfolio’s target allocations and risk exposures. The trim frequency refers to how often the portfolio is rebalanced back to its target weights.
As a rule of thumb:
Trim frequency should align with buy-sell frequency to prevent over-trading.
For example, if the buy-sell frequency is quarterly, the portfolio should not be trimmed monthly, as this could increase transaction costs and turnover unnecessarily.
Initial Selection of Variables
Decile-Based Return Analysis for Predictive Power
Combining Variables for Multi-Factor Analysis
Stock Selection Based on Ranking System
Incorporation of Additional Buy-Sell Rules
Determining Buy-Sell Frequency
Setting Trimming Boundaries
Determining the Number of Stocks in the Strategy
Back-Testing the Strategy
Turnover Management: Reducing Excessive Trading
Frequency Adjustment for Portfolio Trimming and Buy-Sell List
Portfolio Size Adjustment
Stress Testing for Robustness
