According to the literature that an outperforming style changes due to time-varying style premiums, I investigate the dynamic style allocation strategies with Korean stocks under regime switching. I find that value, size, and low volatility are the best styles in the entire sample period. However, low beta and low volatility styles produce superior returns in event regimes, and value and dividend styles outperform in normal regimes. As a result, regime-dependent dynamic style allocations outperform the stock market, static equivalent strategies, and all single-style portfolios, both before and after transaction costs. These outperformances are consistent in in-sample and out-of-sample prediction analysis.

Key words: Style rotation, Smart beta strategy, Factor investing, Style allocation, Regime switching model,
Dynamic strategy