If volatility is high, rebalancing range should be wider as per Institutional Case study. But as per Asset Allocation, it should he narrow to protect the assets from deviating drastically from SAA.
What should be considered right?
Swati_ChitlangiaBeginner
Asset allocation and Institutional Investor
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Hello, We would need to see the liquidity as well. If the liquidity is less then it would be wider band. Feel free to add. Thanks
If volatility is high then usually narrower band is preferred so that asset allocation is not disturbed if all other factors are not considered.
But if let’s say transaction costs are high, then managing a huge volatile asset class with narrow band will result in high costs being incurred. So, if question asks keeping transaction costs in picture, the obviously wider band will be answer.