PT - JOURNAL ARTICLE AU - Luis E. Pereiro AU - Martín González-Rozada TI - Forecasting Prices in Regime-Switching Markets AID - 10.3905/jpm.2015.41.4.133 DP - 2015 Jul 31 TA - The Journal of Portfolio Management PG - 133--139 VI - 41 IP - 4 4099 - https://pm-research.com/content/41/4/133.short 4100 - https://pm-research.com/content/41/4/133.full AB - Linear autoregressive (LAR) models poorly predict asset prices in nonlinear, regime-switching markets. In this article, the authors use SETAR, a threshold model that accounts for nonlinearities, to test for the existence of regime-switching in global equity markets. A comparison of SETAR’s predictive power against that of LAR models suggests that SETAR yields more accurate long forecasts, in both emerging and developed stock markets. The authors discuss extensions of threshold models into portfolio management, corporate valuation, and the long-term forecasting of financial indicators.TOPICS: Portfolio management/multi-asset allocation, security analysis and valuation, factor-based models