Believe in Mean-reverting -> Tighter rebalancing range.
What is the logic in above statement? If you believe in mean-reverting, shouldn’t allow it to developing till eventually self-rebalance to mean?
thanks in advance.
No wrong logic
If the asset is mean reverting, your strategy should be rebalance in tight ranges to realize your gains… before the asset reverts back and you lose all your gains.
Your strategy of buy and hold with a mean reverting asset (also can be considered a sideways market) leads to a realization of zero gains.
thank you:)