We propose a portfolio construction method that accounts for the regime-dependent behavior of stocks, thereby impacting their expected returns. Using a hidden Markov model (HMM) and a regime-weighted least-squares approach, we estimate forward-looking regime-conditional factors. These factors...

This paper proposes maximum (quasi)likelihood estimation for high dimensional factor models with regime switching in the loadings. The model parameters are estimated jointly by EM algorithm, which in the current context only requires iteratively calculating regime probabilities and principal...

This paper proposes maximum (quasi)likelihood estimation for high dimensional factor models with regime switching in the loadings. The model para- meters are estimated jointly by the EM (expectation maximization) algorithm, which in the current context only requires iteratively calculating...