Is Regime Switching in Stock Returns Important in Asset Allocations?

• Main Author: TU, Jun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2008
• Subjects: investments; asset pricing tests; data generating process; regime switching; Bayesian analysis; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1107
• Institution: Singapore Management University

The stock market undergoes regime switching between upturns and downturns. We provide a framework of making investment decisions that accounts for this regime switching together with asset pricing model uncertainty and parameter uncertainty. Once regime switching is incorporated, regardless of the d...