Does constant asset allocation dominate buy-and-hold?

Research output: Contribution to journalArticlepeer-review


There is a widespread perception that it is optimal to keep portfolio weights constant over time, and that the optimal rebalancing frequency is just a question of the transaction cost. This is not generally true. We show that buy-and-hold is not stochastically dominated by any constant allocation strategy. Thus, there are some risk averters, including those requiring a minimal subsistence level, who are better-off with a buy-and-hold strategy when returns are i.i.d, even when rebalancing is free. Perhaps surprisingly, the longer the investment horizon, the larger the set of investors who prefer buy-and-hold over constant allocation.

Original languageAmerican English
Article number105207
JournalFinance Research Letters
StatePublished - Apr 2024


  • Asset allocation
  • Rebalancing
  • Second-degree stochastic dominance
  • Subsistence level

All Science Journal Classification (ASJC) codes

  • Finance


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