Regime Shifts: Implications for Dynamic Strategies

Posted: 23 May 2012

See all articles by Mark Kritzman

Mark Kritzman

Windham Capital Management

Sebastien Page


David Turkington

State Street Associates

Multiple version iconThere are 2 versions of this paper

Date Written: May 22, 2012


Regime shifts present significant challenges for investors because they cause performance to depart significantly from the ranges implied by long-term averages of means and covariances. But regime shifts also present opportunities for gain. The authors show how to apply Markov-switching models to forecast regimes in market turbulence, inflation, and economic growth. They found that a dynamic process outperformed static asset allocation in backtests, especially for investors who seek to avoid large losses.

Authors' Note: Sebastien Page worked on this article while at State Street Global Markets. He has since joined PIMCO.

Suggested Citation

Kritzman, Mark and Page, Sebastien and Turkington, David, Regime Shifts: Implications for Dynamic Strategies (May 22, 2012). Financial Analysts Journal, Vol. 68, No. 3, 2012, Available at SSRN:

Mark Kritzman

Windham Capital Management ( email )

800 Boylston Street
30th Floor
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United States
6174193900 (Phone)
6172365034 (Fax)

Sebastien Page

Pimco ( email )

United States

David Turkington (Contact Author)

State Street Associates ( email )

United States

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