Is regime switching in stock returns important in portfolio decisions?

• Main Author: Jun TU
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: investments; regime switching; model uncertainty; parameter uncertainty; Bayesian analysis; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4774; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5773/viewcontent/SSRN_id1028445.pdf
• Institution: Singapore Management University

The stock market displays regime switching between upturns and downturns. This paper provides a Bayesian framework for making portfolio decisions that takes this regime switching into account, together with asset pricing model uncertainty and parameter uncertainty. The findings reveal that the econo...