Tracking error - rebalancing

CFA Level III Equities
#1

Does rebalancing the index quarterly reduces the transaction cost and thereby tracking error?

#2

As opposed to rebalancing how often? Annually? Monthly? Never?

#3

Monthly

#4

Compared to monthly rebalancing, quarterly rebalancing will reduce transaction costs, but likely increase tracking error.

1 Like
#5

Thank you!

#6

My pleasure.