The authors model contagion by separating returns of the S&P 500 into two regimes (growth and contraction); in doing so, they illustrate the importance of changing policies in different regimes in order to meet the goals of both spending and preserving capital. They suggest dynamic spending rules; whereas, in market downturns, they reduce spending from the neutral policy spending percentage. They give the following examples of potential spending cuts during market crashes: suspend sabbatical leave for faculty, temporary wage freeze, hiring postponement, and hold off on noncritical capital improvements.
MULVEY, J. M., & LIU, H. (2016). Identifying Economic Regimes:
Reducing Downside Risks for University Endowments and Foundations. Journal Of Portfolio Management, 43(1), 100-108.
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