AQR Paper on Trend Following

July 10, 2017

AQR updates their paper from a few years ago on Trend Following performance over the past 100+ years.

They highlight that performance since 2010 has been the worst stretch in the backtest. The main reason for this has been an increase in correlation between many different markets. When correlation increases, trend followers cannot follow and profit from many different trends.

Over the past eight years or so, correlation has increased severly. They notice that high correlation environments tend to hurt Trend Following performance and it thrives in low correlation environments.

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