The Shannon Method of rapid rebalancing has some potential to capture some of the random fluctuations in stock prices. I have pursued combining a small number of relatively uncorrelated stocks in a portfolio and rebalancing them as they move 3% from the prior rebalance point. See my August 2008 post for a more detailed explanation of the Shannon method.
The plots above show the results for a portfolio starting with four stocks (GG, MSFT, O, VLO) weighted 20% each and a 20% cash position. (See prior post.) The rebalancing has outperformed since December 2008. The rebalancing also exhibited some advantage during the 2008 crash.
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