The end of the year is a good time for a short recapitulation. Apart from other things we do (which we will summarize in our next blog in a few days), we have published around 50 short blog posts / recherches of academic papers on this blog during the last year. We want to use this opportunity to summarize 10 of them, which were the most popular (based on Google Analytics tool). Maybe you will be able to find something you have not read yet …

Trend-following funds and strategies were extremely popular after the 2008/2009 crisis. They offered attractive performance, and diversification properties made them a nice addition to investor’s portfolios. Ten years later, “trend-following strategy” is not such a popular word. Strategies didn’t blow-up, but their performance was far from spectacular. What are the main reasons for that? Is it an increased correlation among markets? Are trend rules inefficient? An important recent academic study written by Babu, Hoffman, Levine, Ooi, Schroeder, and Stamelos (all from AQR Capital Management) analyzes trend-following performance for each decade in the last 140 years and uses three distinct factors: the magnitude of market moves, the efficacy of trend-following strategies at capturing profitability from market moves, and the degree of diversification across trends in a trend-following portfolio. They show that it’s the first factor (a lack of large risk-adjusted market moves, positive or negative) that had the biggest impact in the last decade. This suggests that trend-following strategies should be able to deliver better performance in the future if the size of the market moves reverts to levels more consistent with the long-term historical distribution of returns…

Authors: Babu, Hoffman, Levine, Ooi, Schroeder, and Stamelos

Title: You Can’t Always Trend When You Want

ESG Investing (sometimes called Socially Responsible Investing) is becoming a current trend, and its proponents characterize it as a modern, sustainable, and responsible way of investing. Some people love it, others see it as just another fad that will soon be forgotten. We at Quantpedia have decided to immerse in academic research related to this trend to understand it better. How are ESG scores measured? What are the common problems in ESG data? Are there any systematic ESG factor strategies that offer outperformance? These are some of the areas we wanted to explore, and we invite you on this journey with us …

Dear readers,

Six new Quantpedia Premium strategies have been added into our database in November, and five new related research papers have been included into existing Premium strategies.

Additionally, we have produced 22 new backtests written in QuantConnect code. Therefore our database currently contains over 190 strategies with out-of-sample backtests/codes…

Quantitative Easing policy in the US triggered a massive inflow of liquidity to financial markets. This liquidity, combined with the growing popularity of commodities as an asset class, is a cause for a higher inter-connectedness among equity and commodities markets. A recent academic study written by  Ordu-Akkaya and Soytas shows that commodities are not such a good diversifier as they used to be in the past. Moreover, commodity markets are also affected, as periods of higher equity volatility impact commodities significantly more …

Authors: Ordu-Akkaya, Soytas

Title: Unconventional Monetary Policy and Financialization of Commodities