In recent years, there has been a proliferation of academic research that evidences the positive benefits of trend following. I’m a trend follower and have been since I founded my business in 1992. Maybe I was just optimistic when I started, but many years and a track record I’m proud of tells me it works. The reason is tied to our human behavioral tendencies. I’m not sure why but we humans seem to wash, rinse and repeat and in that is your and my opportunity.
AQR’s Brian Hurst, Yao Hua Ooi and Lasse Heje Pedersen authored a white paper in 2014, “A Century of Evidence on Trend-Following Investing.”
Trend-following investing has performed well in each decade over more than a century as far back as we can get reliable return data for several markets. Our analysis provides significant out-of-sample evidence across markets and asset classes beyond the substantial evidence already in literature. Further, we find that a trend-following strategy has performed relatively similarly across a variety of economic environments, and provided significant diversification benefits to a traditional allocation. This consistent long-term evidence suggests that trends are pervasive features of global markets.
Trend following is integral to our investment approach at CMG. Click below to read more about trend following and the research that demonstrates the validity of the approach.READ MORE