How much portfolio rebalancing remains?

The theory of portfolio rebalancing explains how the reallocation of portfolios after a shock drives changes in the prices of the various asset classes. Consider the example of a monetary shock: initially, the weighting of money in wealth is too high, it is then reinvested in other assets and the rise in the prices of these assets rebalances the composition of wealth. We look at how the composition of wealth has evolved in the recent period in the United States, the euro zone and Japan and seek to determine whether portfolio rebalancing, which drives the prices of the various assets, remains to be done. We find that if portfolios are rebalanced, one should expect further rises in: Share prices in the euro zone; Real estate prices in the United States and Japan.