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Markets remain fragile

Amanda White

May 05, 2020

A risk management strategy that measures the resil
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One response to “Markets remain fragile”

  1. James G. Lee, PhD, CFA, FRM

    Amanda, thanks for reporting Prof. Mark Kritzman’s cutting-edge work! I am reading their 2017 book, “A Practitioner’s Guide to Asset Allocation”, include chapter 16: Regime Shifts. To my understanding, there are three models/indicators: 1) Regime Shifts thru Hidden Markov Model, 2) Absorption Ratio, and 3) Financial Turbulence. With the high volatility of equity markets as we we have been experiencing since last week, I am wondering what their models/indicators are telling us this time? Also, what are the advantages of these models/indicators over implied volatilities (e.g., VXN for QQQ, VIX for SPY)? Would these three models/indicators provide earlier warnings and/or more accurate signals about upcoming market turbulence? If yes, how many days do these models expect the market turbulence to last this time? Thanks! James Lee, PhD, CFA

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