0/1 Strategy
The “0/1 strategy” is the binary regime-timing rule popularised by Bulla et al. 2010: allocate 100% to a single risky asset when the model forecasts the bull / low-volatility regime, and 100% to the risk-free asset otherwise. Its appeal is that it isolates the value of regime classification itself — there is no position sizing, leverage or optimisation to confound the test — which is why it became the standard benchmark strategy in the regime-switching asset-allocation literature, re-used by Statistical Jump Model studies and asset-specific regime work. Because it switches on a forecast regime label, its profitability is bounded directly by real-time Regime Misclassification and is highly sensitive to Transaction Costs and Slippage.
Connections
- Bulla et al. 2010 — tests_strategy, source: https://mpra.ub.uni-muenchen.de/21154/1/MPRA_paper_21154.pdf
- Regime-Based Asset Allocation — part-of, source: https://mpra.ub.uni-muenchen.de/21154/1/MPRA_paper_21154.pdf
- Regime Misclassification — suffers_overfitting_risk, source: https://iaorifors.com/paper/30956