Portfolio Rebalancing

Is there a way to setup a portfolio to rebalance on a “rolling” basis? For example, I have portfolios that rebalance annually. Rather than rebalance the entire portfolio at once - and only once - per year, it would be more realistic (i.e., simulate real-world conditions) if we could add & drop positions on a rolling basis, e.g., 1-3 positions every 4 weeks. Is that possible with the Portfolio feature?

Thanks,
Ed

Hi Ed!

There are different sell rules with which to accomplish this. For instance, nobars>63 ensures a stock will only be sold if it is three month in a portfolio. If you want to sell on specific month only, you can specify this with the month function.
I am not aware that you can specify the number of positions to sell at any given moment. However, if you for instance want to sell half your portfolio every 6 month, you can do this with EvenID. In the below scenario you would only buy and sell EvenID=0 stocks in January, while only EvenID=1 stocks would be bought or sold in July (note that you still need to set the portfolio rebalance frequency to 4 weeks to accomplish this).

Buy

Eval(Month=1,EvenID=0,Eval(Month=7,EvenID=1,0)

Sell

Eval(Month=1,EvenID=0,Eval(Month=7,EvenID=1,0) and NoBars>240

The tricky thing is to limit the first purchase of the portfolio to only half the number of holdings. In a live port that can be done manually at the start by rejecting half of the recommendations. In a simulation assuming a 10 stock portfolio this can be approximated as follows:

Eval(SimWeeks<4,RankPos<6,1)

hth,
Florian

If the cross-sectional tools had a scope parameter setting that restricted the selection to the current portfolio holdings, this would be easy to do. I don’t think you can do it now in a reliable way.

Walter

As long as you have the option ‘Allow sold holdings to be re-bought at current rebalance’ set to ‘No’, you can use [font=courier new]PosCnt[/font] to easily control the number of positions sold in sell rules. Keep in mind that the output of the factor should be considered ‘off by one’, since its value will decrease after selling the holding be evaluated.

Thanks guys. With PosCnt, I’m unclear how that would create a “rolling” portfolio with more frequent updates? The objective is to hold a position for an entire year, but not necessarily to sell all positions only once/year. It would be more realistic to be adding positions monthly, or even quarterly. Seems to me that I’d need some other rule besides PosCnt.

You’re correct. It doesn’t exactly accomplish what you’re looking to do on its own.
You might consider combining it with [font=courier new]NoDays[/font] to also require a minimum holding period (e.g. [font=courier new]PosCnt > NUMPOSITIONS - 3 & NoDays > 90 & …[/font]).
Let me know if I missed something.