Optimal Timing for Portfolio Adjustment Using Aggregated Time Series Data

This paper introduces a straightforward approach to identify optimal timing for portfolio adjustments in response to changing market conditions. To mitigate significant losses amid market volatility, we analyze the dynamics of aggregated market returns and propose a novel two-step procedure to detect breaks indicating critical market shifts. Through simulation experiments and empirical examples, we demonstrate the effectiveness of our method in predicting financial crises and systemic risks, providing valuable insights for guiding portfolio adjustments.