Dynamic Strategies and Alpha Regimes in Performance Evaluation

$25

Author: Matthew J. Hergott

This paper applies a Markov regime-switching model to performance evaluation.  The technique enhances traditional performance measures by allowing an investment to have dynamic factor exposure through time.  The author contends that this can help compensate for the limiting assumption in traditional evaluation metrics of a constant risk orientation.  This work details the methodology, describes the possible benefits to a researcher or potential investor, and compares the model to another conditional performance measure.

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The Journal of Performance Measurement

The Performance Measurement Resource.

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