Trend Following

Trend-Following: Why Now? A Macro Perspective

November 16, 2022

Trend following is having a banner 2022 amidst a year of turmoil for traditional portfolios, but investors exploring an allocation to trend-following may be wondering if they are “late to the trade,” while also anchoring their expectations to the lean 2010s. We show that both the macroeconomic picture and empirical evidence suggest that strong performance for trend-following may persist, making it a potentially valuable source of diversifying returns during a challenging time for the rest of investors’ portfolios.

Journal Article

A Century of Evidence on Trend-Following Investing

November 1, 2017 - Brian K. Hurst Yao Hua Ooi Lasse H. Pedersen

We simulate a trend-following strategy back to 1880 and investigate whether strong performance over a few decades was a statistical fluke, or a more robust phenomenon that may hold true over a wide range of economic conditions.

White Paper

Understanding Managed Futures

November 1, 2010 - Brian K. Hurst Yao Hua Ooi Lasse H. Pedersen

Many investors have shied away from managed futures, perhaps due to a lack of understanding of how and why they work. This paper shows how such a strategy can be implemented. We then discuss their performance and diversification benefits historically

Journal Article

Trends Everywhere

May 15, 2019 - Abhilash Babu Ari Levine Yao Hua Ooi Lasse H. Pedersen Erik Stamelos

We provide new out-of-sample evidence on trend-following investing by studying its performance for 82 securities not previously examined and 16 long-short equity factors.

White Paper

A Half Century of Macro Momentum

August 10, 2017 - Jordan Brooks

"Macro momentum has the potential to deliver strong positive returns with low correlation to traditional asset classes across macroeconomic and market environments. It may also provide diversification benefits in bear equity markets and rising yield environments. "

Journal Article

Demystifying Managed Futures

February 1, 2013 - Brian K. Hurst Yao Hua Ooi Lasse H. Pedersen

Commodity trading advisors (CTAs) managed approximately $320 billion as of the end of the first quarter of 2012, running “managed futures” funds that invest long or short in futures contracts on a variety of commodities, such as metals, grains, cotton and other physical goods, as well as futures and forwards on equity indices, Treasury bonds and currencies.

Journal Article

Portfolio Protection? It’s a Long (Term) Story…

April 23, 2020 - Nicholas McQuinn Ashwin Thapar Daniel Villalon

Investors have a natural urge to protect their portfolios from sudden crashes, even though bad outcomes that unfold over longer periods are more detrimental to reaching long-term goals. We show risk-mitigating and diversifying strategies have added value more consistently than options-based hedging over the more important, longer drawdowns.

White Paper

Chasing Your Own Tail (Risk)

July 1, 2011 - Lars N. Nielsen Daniel Villalon Adam Berger

The financial crisis of 2008 made investors painfully aware of tail risk. We present several approaches, when used in combination, may be effective in reducing tail risk.

White Paper

Trend Following and Rising Rates

May 12, 2015 - Lasse H. Pedersen Brian K. Hurst Yao Hua Ooi Erik Stamelos

Can trend followers benefit from the impact of rising yields on asset class returns? We explore a simple trend-following strategy during rising rates and find that the strategy may benefit investors when markets experience gradual, persistent changes

Journal Article

You Can't Always Trend When You Want

April 23, 2019 - Abhilash Babu Ari Levine Yao Hua Ooi Sarah Schroeder Erik Stamelos

We present a framework for understanding the drivers of trend-following returns and show that recent performance challenges are primarily due to muted moves across global markets rather than a change in trend following’s ability to translate market trends into profits.