Leveraging Regime Models to Boost Strategy Performance
We explore how a quantitative approach to market regime models can be used to improve allocations within a simple equity/bond strategy.
Market regimes are defined as periods of persistent market conditions, driven by a myriad of factors including macroeconomic, market trends, shock events, investor sentiment, and more.
And it is these key drivers, which can dominate in certain regimes, that have a significant impact on what strategies or factors work.
As a result, many market participants attempt to understand and predict the current “state” of the market and how the current state will affect securities prices.
In this article, we explore a quantitative approach to regime modeling that employs machine learning, and how it can be used to improve allocations within a simple equity/bond strategy.
