此篇論文利用馬可夫狀態轉換模型實證出在歐元區的股票市場中，以規模溢酬、價值溢酬以及市場溢酬建構的投資組合存在兩個不同的情境狀態。以歐元區市場溢酬和規模溢酬建構的投資組合(SMB portfolios)在牛市存在較高的平均報酬，另一方面以價值溢酬建構的投資組合(HML portfolios)則在熊市有較高的平均報酬。而以規模溢酬、價值溢酬以及歐元區市場溢酬建構的投資組合，其報酬率變異數在熊市皆比牛市來得高。由於此篇論文實證出不論在樣本內或樣本外的測試中，以規模溢酬以及價值溢酬建構的投資組合，其特色反轉投資策略皆優於買入並持有的投資策略，因此本篇論文建議，在歐元區以規模因素（size factor）及帳面價值與市價比因素（book-to-market factor）為考量建構投資組合時，考慮規模溢酬以及價值溢酬在不同情境狀態下的反轉異常現象是重要且不可忽視的課題。

This paper documents the presence of two regimes in the joint distribution of stock returns on European market premium portfolio and portfolios tracking size- and value effects in the Euro area. The mean returns of the EMU market portfolio and SMB portfolios are higher in the bull state while the mean return of the HML portfolio is larger in the bear state. Volatilities of the EMU market portfolio, SMB portfolio and the HML portfolio are all larger in the bear state compared to the bull state. This paper uses the Markov regime-switching model to generate the switching signal of market, size and value portfolios in the stock market and reallocates the market, size and value portfolios in the stock market by the mean-variance approach. Since both in the in-sample and out-sample test, the performance of the style rotation strategy outperforms style consistent strategy of the SMB portfolio and HML portfolio, this paper proposes that when analyzing investments in returns of size and value portfolios in the European market, it is important for us to account for anomalies for size and value effects in European market under different regimes.
In the regime-switching VAR(1) model to account for the net capital flow predictability on the stock returns of EMU market, SMB and HML portfolios and the interrelationships among these variables. The result shows that adding the European Union net capital flow in relation to the economy's size as the predictor variable to the regime switching VAR(1) model, it improves the asset allocation outcomes both in the in-sample and out-sample test. Furthermore, this paper has found that both in the bull and bear states, the impulse response function shows that a shock of one standard deviation of net capital inflows last month will reduce the EMU market return up to near three months. Besides, the net capital inflow shock in European stock market will generates appreciation of companies with low book-to-market ratios (growth stocks) and large-sized firms in the bull state, while it generates appreciation of companies with high book-to-market ratios (value stocks) in the bear state.

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