Trend Following

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The Global Value Momentum Trend Philosophy

By |2018-10-15T19:18:23+00:00June 6th, 2017|Research Insights, Factor Investing, Trend Following, Key Research, Value Investing Research, Momentum Investing Research|

We have a simple mantra that summarizes over a decade of research: If you've been reading our blog for a number of years you're 1) probably a finance geek, and you're 2) probably [...]

Avoiding the Big Drawdown with Trend-Following Investment Strategies

By |2018-10-15T16:30:54+00:00August 13th, 2015|Research Insights, Trend Following, Key Research, Tactical Asset Allocation Research|

Simple timing rules, focused on absolute and trending asset class performance, seem to be useful in a downside protection context. Our analysis of the downside protection model (DPM), applied on various market indices, indicates there is a possibility of lowering maximum drawdown risk, while also offering a chance to participate in the upside associated with a given asset class. Important to note, applying the DPM to a portfolio will not eliminate volatility and the portfolio will deviate (perhaps wildly) from standard benchmarks. For many investors, these are risky propositions and should be considered when using a DPM construct.

The World’s Longest Trend-Following Backtest

By |2018-01-16T20:53:30+00:00November 9th, 2015|Trend Following, Key Research, Tactical Asset Allocation Research|

Were in the middle of an academic research project and we ran a simple long-term trend-following model from January 1, 1801 to September 30, 2015. Recently, there has been some research on the performance of trend-following rules [...]

Trust the Process

By |2018-08-16T08:10:20+00:00June 21st, 2018|Research Insights, Factor Investing, Trend Following, Key Research, Value Investing Research, Momentum Investing Research|

As a native Philadelphian and huge basketball fan, I fully agree with the 76ers fan's rally cry -- Trust the Process. Even the players, such as Joel Embiid, have echoed the sentiment of the fans: [...]

Trend-Following: A Deep Dive Into A Unique Risk Premium

By |2017-10-18T10:56:41+00:00October 18th, 2017|Research Insights, Factor Investing, Trend Following|

Trend-following strategies have historically been laughed at via the modern academic finance research community. Having first-hand knowledge of that community, we can verify that academic researchers are humans like the rest of us (we checked, [...]

Are Factors Better and More Diversifying Than Asset Classes?

By |2018-02-23T11:06:14+00:00February 23rd, 2018|Factor Investing, Trend Following, Guest Posts, Low Volatility Investing|

Executive Summary Factor investing promises outperformance at low cost. But to add value in a portfolio, it must deliver positive risk-adjusted returns and with low correlation to existing holdings. Historically, pure factor exposures have earned [...]

Are Trend-Following and Time-Series Momentum Research Results Robust?

By |2018-06-04T07:51:29+00:00April 27th, 2018|Research Insights, Trend Following, Momentum Investing Research, Tactical Asset Allocation Research|

When it comes to trend following and/or time-series momentum research, we got ya covered! A few places to dig in: Evidence for Long-Term Trend-Following by Alpha Architect World's Longest Trend-Following backtest by Alpha Architect Diversification Benefits of [...]

Book Review — Market Timing with Moving Averages

By |2017-12-20T09:53:01+00:00December 20th, 2017|Research Insights, Trend Following, Trend-Following Course, Book Reviews|

Trend-following is something I've struggled with for years -- always felt like voodoo magic and data-mining. That said, I finally came around to appreciating the practice after a ton of research replication efforts, independent research. [...]

Diversification Benefits of Time Series Momentum

By |2017-08-18T17:06:44+00:00August 10th, 2017|Research Insights, Larry Swedroe, Trend Following|

Similar to some better-known factors like size and value, time-series momentum is a factor that historically has demonstrated above average excess returns. Time-series momentum, also called trend-momentum or absolute momentum, is measured by a portfolio long assets that have had recent positive returns and short assets that have had recent negative returns. Compare this to the traditional (cross-sectional) momentum factor that considers recent asset performance only relative to other assets. The academic evidence suggests that inclusion of a strategy targeting time-series momentum in a portfolio improves the portfolio’s risk-adjusted returns.

Do Trend-following Managed Futures Increase Safe Withdrawal Rates?

By |2017-11-08T12:09:53+00:00November 8th, 2017|Research Insights, Trend Following, Managed Futures Research|

Andrew Miller, a regulator contributor to the blog, is passionate about the intersection of academic finance research and financial planning. We obviously love the academic finance research stuff, but our financial planning advice lacks serious [...]

Go Skew Yourself with Managed Futures

By |2017-08-18T17:04:39+00:00January 10th, 2017|Research Insights, $wdti, Trend Following, Guest Posts, Managed Futures Research|

Skewness is a statistical measure of how returns behave in the tails of a probability distribution.  Wikipedia has a more robust definition of skewness with some good visuals here. If an investment (e.g., stocks) has negative [...]

Time Series Momentum (aka Trend-Following): A Good Time for a Refresh

By |2018-02-09T10:57:32+00:00February 8th, 2018|Research Insights, Trend Following, Momentum Investing Research, Managed Futures Research|

Similar to some better-known factors like size and value, time-series momentum is a factor which has historically demonstrated above-average excess returns. Time-series momentum, also called trend momentum or trend-following, is measured by a portfolio which [...]

Dual Momentum with Stock Selection

By |2017-10-27T18:10:46+00:00March 14th, 2017|Research Insights, Trend Following, Momentum Investing Research, Tactical Asset Allocation Research|

Jack did a nice recap on a momentum paper last week that looks at using fundamentals (revenue volatility, low cost of goods, and B/M) to help identify the best price momentum stocks.This paper sounds similar to the paper Jack reviewed, but there is a key difference: the researchers are looking at the momentum of the fundamentals, not the absolute value of the fundamentals. The authors compile a fundamental momentum variable by calculating the moving averages of 7 elements:return on equity return on assets earnings per share accrual-based operating profitability cash-based operating profitability gross profitability net payout ratio

Tactical Asset Allocation Insights via the Geeks from Thinknewfound

By |2017-08-18T16:56:23+00:00February 16th, 2017|Trend Following, Interviews, Tactical Asset Allocation Research|

How do we identify who is a flash in the pan blogger versus the next Michael Kitces, Josh Brown, or Ben Carlson?We've tried to do our part and help to promote and share research from up and coming "undiscovered" bloggers/writers out there. In our early days, we were helped by long-time bloggers such as Meb Faber and Tadas Viskanta, so we try and return the favor. Recent examples of up and coming guest writers we've highlighted include Dan Sotiroff (now heading to Morningstar!), Aaron Brask, Andrew Miller, Elisabetta Basilico, and Dan Grioli -- all of whom have written interesting and insightful pieces!

The Dirtiest Word In Finance: Market Timing

By |2017-08-18T16:55:39+00:00March 20th, 2017|Research Insights, Trend Following, Guest Posts, Tactical Asset Allocation Research|

In 2015, Cliff Asness made the case that to earn attractive returns with proper risk-based diversification and low correlation to traditional markets, investors need to embrace ‘the three dirty words in finance,’ which he defined [...]

Trend-Following with Valeriy Zakamulin: Moving Average Basics (Part 1)

By |2018-10-08T15:49:39+00:00July 14th, 2017|Trend Following, Trend-Following Course, Introduction Course, Guest Posts, Investor Education|

One of the basic principles of technical analysis is that ``prices move in trends". Traders firmly believe that these trends can be identified in a timely manner and used to generate profits and limit losses. Consequently, trend following is the most widespread market timing strategy; it tries to jump on a trend and ride it. Specifically, when stock prices are trending upward (downward), it's time to buy (sell) the stock. Even though trend following is very simple in concept, its practical realization is complicated. One of the major difficulties is that stock prices fluctuate wildly due to imbalances between supply and demand and due to constant arrival of new information about company fundamentals. These up-and-down fluctuations make it hard to identify turning points in a trend. Moving averages are used to ``smooth" the stock price in order to highlight the underlying trend.

Trend-Following with Valeriy Zakamulin: Types of Moving Averages (Part 2)

By |2018-10-08T15:49:38+00:00July 21st, 2017|Trend Following, Trend-Following Course, Introduction Course, Guest Posts, Investor Education|

In this post we aim to give an overview of some specific types of moving averages. Specifically, we cover "ordinary" moving averages and mention some examples of exotic moving averages.

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