Index | Recent Threads | Who's Online | Search

New Thread
This topic has been viewed 101 times and has 2 replies
jmh
Does the portfolio turnover % includes rebalancing transactions? (as opposed to "replacing" stock transactions)

Hi P123,

How is the turnover calculated particularly for a live strategy that uses active weighting?
- I have a strategy that does circa 300% per P123 statistics. Portfolio of 10 stocks.
- I understand that to mean the portfolio -on average- replaces the 10 stocks 3 times over a given 12 months period.

But every time it sells a stock and replaces it with a new stock, it (might and often does) adjusts the weight of all other stocks (because of the active weighting).
Example on the screenshot below:
- DPZ and TAP are sold
- SBUX and QRTEA are bought
- But MO has to be “re-weighted” down to 4.74%

Are these “re-weighting” transactions included in the rebalancing % number? How?

Thank you very much,

Jerome

Attachment Rebalancing example.pdf (19836 bytes) (Download count: 3)


Mar 15, 2019 8:38:58 AM       
wwasilev
Re: Does the portfolio turnover % includes rebalancing transactions? (as opposed to "replacing" stock transactions)

Hi Jerome,

I don't the know the answer. But I believe that 'Average Annual Turnover' is a dollar volume type of metric and is defined as the ratio of the total of all purchases (or sales) in a portfolio over a period of time to the average value of the portfolio over that period of time.

Portfolio Turnover = Total Purchases/Average Portfolio Value

I would expect that any re-weighting of open positions would affect that calculation.

Walter

Mar 15, 2019 12:38:03 PM       
jmh
Re: Does the portfolio turnover % includes rebalancing transactions? (as opposed to "replacing" stock transactions)

Thank you Walter

I think you are probably right based on the investopedia definition
https://www.investopedia.com/terms/p/portfolioturnover.asp

Could anyone from P123 confirm?

Thank you

Jerome

Mar 16, 2019 8:11:22 AM