Hey guys, since some of you have extensive industry exprience, I figured you might know this quite well: if there's a sizeable change in the value of some stock that large funds are invested in, when do they tend to rebalance those positions??? Are there some rules/regulations/common practices? Do they do it in overnight crossing sessions? Thanks a bunch in advance and happy trading to all. V.
The funds tend to rebalance their holdings near the end of the month and/or quarter, so they can drop the losers and add the better performing stocks to improve the return for monthly/quarterly statements. This process is more commonly called "window dressing."
Thanks. Yes, I am aware of window dressing by funds. What I was asking was a bit more short term, and more on the rational/productive/logical side of their actions. I was thinking that if a large fund has a position in some security and it changes value, up or down drastically within a given close-to-close period, the fund would eventually have to rebalance to keep the weights in the portfolio as the targeted levels. So if a stock lost, say, 10% of it's value, it would have to buy more to maintain the weights. Does that ever happen in practice? If it does, then when is it more likely to happen? I heard from one source that they usually do it at the close of the next day. In another place, I seem to find that such funds do most of the trading in overnight crossing sessions... Any truth there? Thanks again.
As a total amateur, I'll take a wild guess: I would think a 10% drop would put the fund in some kind of computer programmed selling mode and all "balancing" bets would be off until a manager figured out the market direction.