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Asset ManagementA Systematic Approach to Factor Investing$
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Andrew Ang

Print publication date: 2014

Print ISBN-13: 9780199959327

Published to Oxford Scholarship Online: August 2014

DOI: 10.1093/acprof:oso/9780199959327.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 26 September 2021

Investing for the Long Run

Investing for the Long Run

(p.113) Chapter 4 Investing for the Long Run
Asset Management

Andrew Ang

Oxford University Press

The foundation of long-term investing is to rebalance to fixed asset positions, which are determined in a one-period portfolio choice problem where the asset weights reflect the investor’s attitude toward risk. Rebalancing is a counter-cyclical strategy that buys low and sells high. It worked well even during the Great Depression of the 1930s and the Lost Decade of the 2000s. Rebalancing goes against investors’ behavioral instincts and is also a short volatility strategy.

Keywords:   portfolio choice, rebalancing, Merton, dynamic programming, buy-and-hold, hedging demand, counter-cyclical investing, rebalancing bands, short volatility, liability hedging, diversification return, variance drain, Kelly (1956) rule

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