Formula weighted buying and selling. Lots and lots of buying and selling

General
1

Is it normal behavior for formula weighted sims to buy and sell a LOT in the form of rebalancing? Can it be mitigated? Or should it be mitigated?

Thanks
Tony

2

If you allow some drift and transaction hysteresis, such as:

Max Portfolio Drift 5% From Ideal Weights
Max Position Drift 5% From Ideal Weight
Min Rebalance Transaction 5.00%

The number of rebalance transactions will drop, but in my experience, the total return will drop as well.
So there is a happy medium somewhere…

3

How do you force a formula weighted sim to hold a certain number of stocks?

Thanks
Tony

4

With formula weight rebalancing the weight will be determined by your formula.

So let say you use 30 - Rankpos as your fomula, then all stocks with a rank > 30 will have a weight < 0 and hence will be ignored. This means that if you have “ideal number of positions” of 100, then it will be capped at 30.

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