Rebalancing of investment is a concave trading strategy; as opposed to constant proportion portfolio insurance (CPPI), which has convex payoff characteristic.
[1] Templeton used an early version of Cyclically adjusted price-to-earnings ratio to estimate valuations for the overall U.S. stock market.
The promise of higher returns from rebalancing to a static asset allocation was introduced by William J. Bernstein in 1996.
[citation needed] Similarly, it is argued a buy-and-hold rebalancing strategy will outperform in up-trending markets.
His research indicates over-rebalancing might add up to 2% per year, due to the contrarian strategy of buying disproportionately more of temporarily under-valued assets which will eventually recover.