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CFA Institute

John Montgomery4 min read

CFA Institute

The CFA Institute is the global association of investment-management professionals that administers the Chartered Financial Analyst (CFA) credential and publishes the Financial Analysts Journal (FAJ), a peer-reviewed practitioner-academic journal first issued in 1945. Within this vault it functions as the principal named practitioner-research venue — distinct from the SSRN/arXiv/NBER academic strand and from anonymous retail marketing. FAJ articles carry disclosed methodology, named CFA-charterholder authors and editorial peer review, so they are admissible under the vault’s hard source constraints while still being industry-facing rather than purely academic. That dual identity matters: the vault’s emerging conclusion is that practitioner research treats Markov/regime models more soberly than retail marketing does, and the FAJ is where that sobriety is documented.

The FAJ is the publication home of two foundational regime papers in this vault. Kritzman Page Turkington 2012, “Regime Shifts: Implications for Dynamic Strategies” (FAJ 68(3), 22-39), applies Markov-switching models to forecast regimes in market turbulence, inflation and economic growth, and reports that a regime-conditioned dynamic allocation beat static allocation in out-of-sample backtests — explicitly framed for “investors who seek to avoid large losses”. Kritzman and Li 2010, “Skulls, Financial Turbulence, and Risk Management” (FAJ 66(5), 30-41), introduced the Financial Turbulence Index, a Mahalanobis-distance outlier measure used to scale risk, not to generate directional alpha. The more recent Bouye and Teiletche 2025 (FAJ 81(4)) continues the line, modelling economic regimes as a mixture of distributions for strategic — not tactical — asset allocation. Across all three, the FAJ consistently positions regimes as a risk-management and asset-allocation input.

This framing is the analytically important point. Where retail marketing pages tend to present Markov models as direct profit engines, the CFA Institute literature is conspicuously measured: it stresses out-of-sample testing over in-sample fitting (Kritzman, Page & Turkington explicitly criticise the many authors who only “fit” regimes in sample), it foregrounds drawdown avoidance and volatility reduction over excess return, and it treats regime detection as one input among many. The CFA Institute’s own Enterprising Investor review of Kinlaw, Kritzman & Turkington’s Asset Allocation: From Theory to Practice and Beyond (2021) — a book that builds a regime-shifting approach on a hidden Markov model — closes on the deliberately unglamorous advice to “have a long-term plan, rebalance your portfolio to that plan, but don’t trade too often”. The CFA Program curriculum likewise documents the costs and risks of Tactical Asset Allocation rather than promoting it.

For this vault, the CFA Institute is therefore best read as corroborating evidence for the regime-as-risk-tool thesis rather than as a source of profitability claims. Its papers report backtested outperformance, but they are graded honestly within the vault (inconclusive/moderate, not strong): the headline FAJ results are member-paywalled, lack full public cost and turnover disclosure, and — for Kritzman, Page & Turkington — predate the deflated-Sharpe and combinatorial-purged-cross-validation scrutiny that Marcos López de Prado and David H. Bailey later made standard. The institution adds credibility and disclosed methodology; it does not, on its own, substantiate tradeable alpha.

CFA Institute [funds] Kritzman Page Turkington 2012 CFA Institute [funds] Kritzman and Li 2010 CFA Institute [funds] Bouye and Teiletche 2025 Kritzman Page Turkington 2012 [supports] Regime-Based Asset Allocation Financial Turbulence Index [supports] Regime Classification

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