TY - JOUR T1 - Practical Applications of Identifying Economic Regimes: <em>Reducing Downside Risks for University Endowments and Foundations</em> JF - Practical Applications SP - 1 LP - 4 DO - 10.3905/pa.2017.4.4.210 VL - 4 IS - 4 AU - John M. Mulvey AU - Han Liu A2 - Moore, Howard Y1 - 2017/04/30 UR - https://pm-research.com/content/4/4/1.1.abstract N2 - Identifying Economic Regimes: Reducing Downside Risks for University Endowments and Foundations John M Mulvey Han Liu Overview Institutional investors, particularly nonprofits who rely on their endowments, must protect their capital from worst-case scenarios of major financial crashes, situations that frequently involve contagion—increases in correlation and volatility.In Identifying Economic Regimes: Reducing Downside Risks for University Endowments and Foundations , authors John Mulvey and Han Liu of Princeton University develop a machine-learning algorithm to identify financial regimes and help investors more accurately model downside risk.They find that a multiregime simulation provides more accurate estimates, and they also demonstrate the advantages of adjustable-spending rules during drawdown periods“In the two-regime approach, you get fatter tails, and the worst-case distributions tend to be more historically accurate than using data from a single regime,” explains Mulvey.TOPICS: Exchanges/markets/clearinghouses, risk management ER -