All three rebalancing straetgies- Buy and Hold, Constant Mix, and Constant proportion of portfolio insurance fits investors with increasing risk tolerance with respect to wealth. However, CPPI (compared to BH) fits for investors who have more risk tolerance. Constant Mix has constant relative risk tolerance with respect to wealth because the equity % of portfolio remains same.
If you guys have better/clearer ways to frame these concepts, please write it. Thanks.
convex strategies like CPPI - more risk tolerance, less risk aversion - want to take on more risk. buy more equities when the market goes up – more risky behavior.
The way I view it now is that there are only 3 types of investors in a closed economy, BH, CM, CPPI. So when stocks go up or down, CM and CPPI trade with each other according to their desire for holding stock.
The way I view it now is that there are only 3 types of investors in a closed economy, BH, CM, CPPI. So when stocks go up or down, CM and CPPI trade with each other according to their desire for holding stock.