Regime-Aware Portfolio Construction: Dynamic Asset Allocation Using Volatility States, Correlation Breaks, and Macro Signals
Regime-Aware Portfolio Construction is written for investors and quantitative practitioners who understand that markets are not stationary systems and that allocation frameworks must adapt as conditions change.
Traditional portfolio construction assumes stable correlations, consistent volatility, and reliable return distributions. In reality, markets transition through distinct regimes marked by volatility expansions, correlation breakdowns, liquidity shocks, and macro-driven inflection points. Strategies that ignore these shifts tend to fail precisely when protection matters most.
This book presents a systematic approach to dynamic asset allocation built around regime detection rather than static optimization. It shows how volatility states, correlation instability, and macro signals can be combined into a coherent decision framework that adjusts exposure as market structure evolves.
You will explore how to:
Identify volatility regimes and transition risk using market-derived signals
Detect correlation clustering and breakdowns before they impact portfolio stability
Integrate macro indicators without relying on discretionary forecasts
Adapt Black-Litterman, HRP, and risk-based allocations to non-stationary environments
Design allocation rules that respond to regime shifts instead of reacting after drawdowns
Rather than proposing a single "optimal" portfolio, this book focuses on portfolio behavior across regimes, how capital should be allocated differently during expansion, contraction, stress, and recovery phases.
The emphasis is on robustness, adaptability, and risk control in real-world conditions where assumptions fail and distributions change. Mathematical rigor is paired with practical implementation guidance, making the concepts usable for systematic investors, asset managers, and advanced traders.
Regime-Aware Portfolio Construction is not about predicting the future. It is about building portfolios that remain resilient when the market changes its rules.
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