RT Journal Article SR Electronic T1 Practical Applications of Identifying Economic Regimes: Reducing Downside Risks for University Endowments and Foundations JF Practical Applications FD Institutional Investor Journals SP 1 OP 4 DO 10.3905/pa.2017.4.4.210 VO 4 IS 4 A1 John M. Mulvey A1 Han Liu A1 Howard Moore YR 2017 UL https://pm-research.com/content/4/4/1.1.abstract AB 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