Introduction Course Archives

Treasury Bonds: Buy and Hold or Trend Follow?

By Wesley Gray, PhD|August 10th, 2022|Research Insights, Trend Following, Introduction Course, Tactical Asset Allocation Research|

If one had to invest in buy and hold treasury bonds or trend-followed treasury bonds, it is likely that most investors would prefer the trend-followed bond investment. However, in a broader portfolio context, the analysis suggests that how one 'eats' their bond exposure is largely irrelevant and the portfolio's long-term outcome will be driven by equity market dynamics. Bonds systematically lower an equity-centric portfolio's returns, but they also lower the risk profile of the overall portfolio.

Trend Following Says Commodities…But Nothing Else!

By Wesley Gray, PhD|August 3rd, 2022|Research Insights, Trend Following, Introduction Course, Tactical Asset Allocation Research|

The analysis above highlights that we are in a rare regime when commodities are the only long asset with a positive trend. The last time this happened we entered a long period of high inflation and poor real returns. Will this happen again? Who knows. But we do know that post-1973 we entered a world where, for several decades (at least up to around 2007), both bonds and commodities were an important component of a diversified portfolio. The recent past has arguably made investors complacent in their reliance on a stock/bond portfolio as an end-all-be-all solution. When history tells us that incorporating commodities into a portfolio probably makes sense from a diversification standpoint.

Time Series Momentum: Theory and Evidence

By Valeriy Zakamulin|June 30th, 2020|Trend Following, Trend-Following Course, Introduction Course|

Time Series Momentum in the US Stock Market: Empirical Evidence and Theoretical Implications Valeriy Zakamulin and Javier GinerWorking paper, University of Agder and University of La LagunaA version of this paper can be found here [...]

Daily vs. Monthly Trend-Following Rules…Plus Some DIY Tools!

By Valeriy Zakamulin|April 7th, 2020|Trend Following, Trend-Following Course, Introduction Course|

Trend-following strategies are a lot like stock-picking strategies -- there are endless approaches and varying levels of complexity. In this short piece, we explore the decision related to implementing basic trend-following strategies on either a [...]

Pitfalls When Assessing Market-Timing Strategies

By Valeriy Zakamulin|March 27th, 2019|Introduction Course|

Consider a market-timing strategy which supposedly predicts the direction of the stock market trend. Such a strategy generates Buy and Sell signals. A Buy signal is the signal to buy stocks, whereas a Sell signal [...]

If you had to do a trend following strategy, what would it be and why?

By Valeriy Zakamulin|February 22nd, 2019|Research Insights, Trend Following, Introduction Course|

The topic of this blog post was inspired by Wes, who said the following: Valeriy, you have done more formal academic research on trend-following than anyone I know...Skepticism aside, let's I forced you to pick [...]

Trend-Following with Valeriy Zakamulin: Trading in Various Financial Markets (Part 8)

By Valeriy Zakamulin|September 8th, 2017|Trend Following, Trend-Following Course, Introduction Course|

In our final blog post, that finishes the trend-following series, we briefly review the results of the forward-tests of the profitability of various trend following rules in different financial markets: stocks, bonds, currencies, and commodities. [...]

Trend-Following with Valeriy Zakamulin: Trading the S&P 500 Index (Part 7)

By Valeriy Zakamulin|September 1st, 2017|Trend Following, Trend-Following Course, Introduction Course|

The Standard and Poor's (S&P) 500 index is a value-weighted stock index based on the market capitalizations of 500 large companies in the US. This index was introduced in 1957 and intended to be a [...]

Trend-Following: Testing the Profitability of Trading Rules (Part 6)

By Valeriy Zakamulin|August 25th, 2017|Trend Following, Trend-Following Course, Introduction Course, Investor Education|

The difficulty in testing the profitability of trend-following rules stems from the fact that the procedure of testing involves either a single- or multi-variable optimization. Specifically, any trading rule considered in Part 3 has at [...]

Trend-Following with Valeriy Zakamulin: Performance Measurement and Outperformance Tests (Part 5)

By Valeriy Zakamulin|August 18th, 2017|Trend Following, Trend-Following Course, Introduction Course, Investor Education|

We consider an investor and a financial market that consists of only two assets: one risky asset and one safe (or risk-fee) asset. An example of a risky asset is an investable stock market index. [...]

Trend-Following with Valeriy Zakamulin: Anatomy of Trading Rules (Part 4)

By Valeriy Zakamulin|August 13th, 2017|Trend Following, Trend-Following Course, Guest Posts, Introduction Course, Investor Education|

In our context, a technical trading indicator can be considered as a combination of a specific technical trading rule with a particular moving average of prices. In two preceding blog posts we showed that there [...]

TREND-FOLLOWING WITH VALERIY ZAKAMULIN: TECHNICAL TRADING RULES (PART 3)

By Valeriy Zakamulin|August 11th, 2017|Trend-Following Course, Trend Following, Introduction Course|

A trend following strategy is based on switching between a financial asset and cash depending on whether the asset prices trend upward or downward. Specifically, when the strategy identifies that prices trend upward (downward), it [...]

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

By Valeriy Zakamulin|July 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.

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

By Valeriy Zakamulin|July 14th, 2017|Trend Following, Trend-Following Course, Guest Posts, Introduction Course, 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.

Our summertime introductory finance education course

By Wesley Gray, PhD|May 2nd, 2016|Introduction Course, Investor Education|

Well, it's my birthday today, so I'm getting older, but I'm in high spirits because younger people are so excited to learn new things. Over the past week, a few younger blog readers (and even some [...]

How to Use Factor Funds in a Diversified Portfolio

By Jack Vogel, PhD|September 30th, 2015|Introduction Course, Investor Education, Key Research, Tactical Asset Allocation Research|

Active management has been out of favor for a while--high fees, high tax burdens, and poor long-term performance. But with the slow rise of actively managed ETFs, which have lower costs and more tax efficient [...]

Basic Factor Analysis: Simple Tools to Understand What Drives Performance

By Wesley Gray, PhD|May 28th, 2015|Research Insights, Introduction Course, Investor Education|

Investors should know what they are buying and why they are buying it. Unfortunately, more often than not, investment products are jammed down the throats of unsuspecting victims who are either ignorant, easy to influence, [...]

Where to Find Cool Academic Finance Research

By Wesley Gray, PhD|April 1st, 2015|Introduction Course|

Over the past 10+ years I've cultivated a laundry list of websites associated with financial economics. My primary focus has been identifying sources for new ideas that are creative, unique, and have application in the real-world. Interestingly [...]

An Introduction to Investing and How to Use Our Site

By Wesley Gray, PhD|January 3rd, 2015|Research Insights, Introduction Course, Investor Education, Key Research, Business Updates|

What We Do? https://vimeo.com/205882484 Our Story We are a research-intensive asset management firm with a focus on high-conviction value and momentum factor exposures, as opposed to "closet-index" factor exposures. More broadly, we seek to deliver "Affordable Alpha," which [...]

How to Calculate Volatility in Excel

By Wesley Gray, PhD|December 19th, 2014|Introduction Course, Investor Education, Low Volatility Investing|

Wild-swinging oil prices have caused some chaos, or "volatility," in the financial markets recently. We've also heard a lot in the financial media regarding the strong performance of "low volatility" funds. But what exactly is [...]

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