Regime-switching factor investing with hidden Markov models
| العنوان: | Regime-switching factor investing with hidden Markov models |
|---|---|
| المؤلفون: | Yi-Hong Lin, Matthew Wang, Ilya V. Mikhelson |
| المصدر: | Journal of Risk and Financial Management Volume 13 Issue 12 Journal of Risk and Financial Management, Vol 13, Iss 311, p 311 (2020) |
| بيانات النشر: | Basel: MDPI, 2020. |
| سنة النشر: | 2020 |
| مصطلحات موضوعية: | 050208 finance, Investment strategy, 05 social sciences, lcsh:Risk in industry. Risk management, Benchmarking, Investment (macroeconomics), lcsh:HD61, market regime, factor models, 0502 economics and business, lcsh:Finance, lcsh:HG1-9999, Absolute return, Econometrics, Economics, ddc:330, Portfolio, Stock market, 050207 economics, Hidden Markov model, hidden Markov model, Factor analysis |
| الوصف: | This study uses the hidden Markov model (HMM) to identify different market regimes in the US stock market and proposes an investment strategy that switches factor investment models depending on the current detected regime. We first backtested an array of different factor models over a roughly 10.5 year period from January 2007 to September 2017, then we trained the HMM on S& P 500 ETF historical data to identify market regimes of that period. By analyzing the relationship between factor model returns and different market regimes, we are able to establish the basis of our regime-switching investing model. We then back-tested our model on out-of-sample historical data from September 2017 to April 2020 and found that it both delivers higher absolute returns and performs better than each of the individual factor models according to traditional portfolio benchmarking metrics. |
| وصف الملف: | application/pdf |
| اللغة: | English |
| URL الوصول: | https://explore.openaire.eu/search/publication?articleId=doi_dedup___::3f7eab78a3bb6787bf7629302adb29ff https://hdl.handle.net/10419/239397 |
| Rights: | OPEN |
| رقم الانضمام: | edsair.doi.dedup.....3f7eab78a3bb6787bf7629302adb29ff |
| قاعدة البيانات: | OpenAIRE |
| الوصف غير متاح. |