Strategy decay and regime change

When a working approach stops working.

Strategy decay and regime change

| Concept | Explanation | |---|---| | Strategy decay | A previously effective approach loses effectiveness. | | Crowding | More participants compete for the same opportunity. | | Structural change | Regulation, technology, or market design changes. | | Regime change | Inflation, growth, rates, or volatility environment changes. | | Parameter drift | Settings no longer fit asset behavior. | | Retirement rule | Condition for reducing or stopping the strategy. |

Module knowledge check

1. How does money-weighted return differ from time-weighted return?
2. What is maximum drawdown?
3. Why should a loss be classified by cause?
4. What evidence can indicate strategy decay?

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