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Working Paper
Regime shifts in mean-variance efficient frontiers: some international evidence
Regime switching models have been assuming an increasingly central role in financial applications because of their well-known ability to capture the presence of rich non-linear patterns in the joint distribution of asset returns. After reviewing key concepts and technical issues related to specifying, estimating, and using multivariate Markov switching models in financial applications, in this paper we examine how the presence of regimes in means, variances, and covariances of asset returns translates into explicit dynamics of the Markowitz mean-variance frontier. In particular, we show both ...