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UID:194c9941acb624d90f18bc7121f7c398
CATEGORIES:Seminars
CREATED:20241014T052824
SUMMARY:Lunch Seminar: Alessandro Melone - Ohio State University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:<p><em><strong>The Economic Implications of Rebalancing</strong></em></p><p
 >Abstract:</p><p style="text-align: justify;">Trillions of dollars in pensi
 on funds and other institutional investors engage in regular portfolio reba
 lancing. This rebalancing often occurs based on a calendar date or a deviat
 ion from a threshold. We show that such rebalancing has a market impact and
  induces predictability. When stocks are overweight, funds sell stocks and 
 buy bonds, leading to a decrease in equity returns of 17 basis points over 
 the next day. We find our results are robust to including controls for mome
 ntum, reversals, and macroeconomic information. Importantly, mechanical reb
 alancing offers certain investors the opportunity to front-run the predicta
 ble trades of these large funds. We estimate that the cost of current rebal
 ancing policies is approximately $16 billion per year—or $200 per U.S. hous
 ehold.</p>
DTSTAMP:20260421T102204Z
DTSTART:20241218T130000Z
DTEND:20241218T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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