Portfolio Construction When Regimes are Ambiguous

Working paper for a new concept called relevance to estimate regime-specific expected returns, standard deviations, and correlations. This relevance-based approach to portfolio construction explicitly accounts for the importance of an observation to forming an estimate, and it seamlessly enables the inclusion of multiple regime indicators in a principled way.

See
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4422674

2023-11-01 update:
Published in the Journal of Portfolio Management Volume 50, Number 1 (November 2023).
https://doi.org/10.3905/jpm.2023.1.538