Detecting Regime Shifts: The Causes of Under- and Over-Reaction

Detecting regime shifts in artificial ecosystems

Ecosystems are subjected to a range of perturbations that have the potential to induce relatively sharp transitions in states. These can be referred to as regime shifts or critical transitions. They may be driven by perturbations that vary over a wide range of spatial and temporal scales, from responses to deforestation within a small field to responses to the gradual increase of carbon dioxide...

Size and Value Anomalies under Regime Shifts

This paper finds strong evidence of time-variations in the joint distribution of returns on a stock market portfolio and portfolios tracking sizeand value effects. Mean returns, volatilities and correlations between these equity portfolios are found to be driven by underlying regimes that introduce short-run market timing opportunities for investors. The magnitude of the premia on the size and ...

Dynamic resource management under the risk of regime shifts

This paper provides a framework through which a dynamic resource management problem with potential regime shifts can be analyzed both in a strategic environment and from a social planner's perspective. Based on a fairly general model, a condition for a precautionary policy is discussed. By applying the framework to a common-property resource problemwith a linear production technology, we illust...

An Analysis of the Real Interest Rate under Regime Shifts

Résumé This study considers the time series behavior of the U.S. real interest rate from 1961 to 1986. We provide a statistical characterization of the series using the methodology of Hamilton (1989), by allowing three possible regimes affecting both the mean and variance of the series. The results suggest that the ex-post real interest rate is essentially random around a mean that is different...

Understanding under- and over-reaction