Asset Allocation with Markovian Regime Switching: Efficient Frontier and Tangent Portfolio with Regime Switching

Asset Allocation under Multivariate Regime Switching

This paper studies asset allocation decisions in the presence of regime switching in asset returns. We find evidence that four separate regimes characterized as crash, slow growth, bull and recovery states are required to capture the joint distribution of stock and bond returns. Optimal asset allocations vary considerably across these states and change over time as investors revise their estima...

Portfolio Selection with Jumps under Regime Switching

We investigate a continuous-time version of the mean-variance portfolio selection model with jumps under regime switching. The portfolio selection is proposed and analyzed for a market consisting of one bank account andmultiple stocks. The random regime switching is assumed to be independent of the underlying Brownian motion and jump processes. A Markov chain modulated diffusion formulation is ...

Portfolio Selection in the Enlarged Markovian Regime-Switching Market

Strategic Asset Allocation and Consumption Decisions under Multivariate Regime Switching∗

This paper studies strategic asset allocation and consumption choice in the presence of regime switching in asset returns. We find evidence that four separate regimes characterized as crash, slow growth, bull and recovery states are required to capture the joint distribution of stock and bond returns. Optimal asset allocations vary considerably across these states both among bonds and stocks an...

Dynamic Portfolio Optimization with a Defaultable Security and Regime Switching

We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market coefficients are assumed to depend on the market regime in place, which is modeled by a finite state continuous time Markov process. By separating the utility m...