TY - JOUR T1 - Asset Allocation in Stable and Unstable Times JF - The Journal of Investing SP - 72 LP - 80 DO - 10.3905/joi.2004.434554 VL - 13 IS - 3 AU - Rob Bauer AU - Roul Haerden AU - Roderick Molenaar Y1 - 2004/08/31 UR - https://pm-research.com/content/13/3/72.abstract N2 - Turbulence, uncertainty, and unstable parameters in financial markets can have severe effects on the risk and return characteristics of investment portfolios. A procedure for identification of multivariate outliers may be used to construct risk parameters and optimal portfolios for both quiet (good) and turbulent (bad) times. Is such a procedure profitable from a practitioner's point of view? According to a backtesting strategy under the assumption of perfect foresight with regard to the prevailing regime, a regime-switching strategy improves on a standard full-sample optimization strategy, but the transaction costs associated with high turnover detract considerably from performance. ER -