We propose a practical investment framework for dynamic asset allocation across different economic regimes, which we illustrate using a sample of U.S. data from 1948 to 2007. We identify four regimes in the economic cycle and find that these regimes capture pronounced time-variation in the risk...

Theoretical models, such as the CAPM, predict a positive relation between risk and return, but the empirical evidence paints a mixed picture. Positive, flat and negative relations have been reported in various empirical studies. In this paper we reconcile these seemingly conflicting results by...

We show that the performance of a fundamental index with annual rebalancing, as proposed by Arnott, Hsu and Moore (2005), can be highly sensitive to the subjective choice of when to rebalance. For the year 2009, for example, we find that a fundamental index rebalanced every March outperformed...

The mean-semivariance CAPM strongly outperforms the traditional mean-variance CAPM in terms of its ability to explain the cross-section of US stock returns. If regular beta is replaced by downside beta, the traditional risk-return relationship is restored. The downside betas of low-beta stocks...