New related paper to #118 – Time Series Momentum Effect – Trend Following and Macroeconomic Risk
Related research paper has been included into existing free strategy review.
#118 – Time Series Momentum Effect
Authors: Hutchinson, O'Brien
Title: Trend Following and Macroeconomic Risk
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2550718
Abstract:
We examine the relationship between the returns of trend following and macroeconomic risk. Our results demonstrate that macroeconomic factors do have a statistically significant relationship with trend following, when we allow for the dynamic exposures of the strategy. We find that this time varying risk exposure allows trend following to generate positive returns across a wide range of bond and equity market cycles. Prior research has documented that the majority of cross sectional momentum returns are derived from macroeconomic risk exposures. However, the same is not true for trend following where at least half of performance comes from the unexplained components of futures returns. When we relate performance to the conditional volatility of macroeconomic variables, our results show that trend following generates higher returns in periods where economic uncertainty is low.
Notable quotations from the paper:
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