PT - JOURNAL ARTICLE AU - Peter Nystrup AU - Bo William Hansen AU - Henrik Madsen AU - Erik Lindström TI - Regime-Based Versus Static Asset Allocation: <em>Letting the Data Speak</em> AID - 10.3905/jpm.2015.42.1.103 DP - 2015 Oct 31 TA - The Journal of Portfolio Management PG - 103--109 VI - 42 IP - 1 4099 - https://pm-research.com/content/42/1/103.short 4100 - https://pm-research.com/content/42/1/103.full AB - Regime shifts present a big challenge to traditional strategic asset allocation. This article investigates whether regimebased asset allocation can effectively respond to changes in financial regimes at the portfolio level, in an effort to provide better long-term results than more static approaches can offer. The authors center their regime-based approach around a regime-switching model with time-varying parameters that can match financial markets’ tendency to change behavior abruptly and the fact that the new behavior often persists for several periods after a change. In an asset universe consisting of a global stock index and a global government bond index, they show that, even without any level of forecasting skill, holding a static portfolio may not be optimal.TOPICS: Statistical methods, portfolio management/multi-asset allocation