This week's research note is very brief, but we believe highlights a potentially under-appreciated benefit of ensemble approaches: rebalancing.
As trivial as rebalancing can, the literature on the subject is deep and suggests that when thoughtfully utilized, rebalancing can actually become a source of return.
In this week's note, we demonstrate that in combining two specifications of the same strategy, we can actually construct a portfolio that has a higher expected return than either. (PDF)
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→ REBALANCE PREMIUM: "As fire can be either dangerous, if uncontrolled, or useful to run a mechanical engine if controlled, in the very same way it should be possible to put volatility to work in a controlled manner in order to produce growth." Demystifying Rebalancing Premium and Extending Portfolio Theory in the Process