Wang, Matthew; Lin, Yi-Hong; Mikhelson, Ilya - In: Journal of risk and financial management : JRFM 13 (2020) 12/311, pp. 1-15
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...