“Asset prices observed in the equity market often exhibit abrupt changes. While some changes can be momentary (jumps), other changes can persist for a longer period. Regime switching models are commonly employed in the equity market returns to capture this behaviour. We show that forward-looking information extracted from option prices improves regime detection. In particular, horizon differences in option-implied equity risk premia allow earlier detection of regime switches and produces clear regime switching probabilities. This finding holds across recent disaster periods like the 2008-2009 financial crisis and the 2020 Covid pandemic outbreak, in both US and emerging equity markets.”