Trend Following with Managed Futures: The Search for Crisis Alpha

by Alex Greyserman, Kathryn Kaminski

An all-inclusive guide to trend following

As more and more savvy investors move into the space, trend following has become one of the most popular investment strategies. Written for investors and investment managers, Trend Following with Managed Futures offers an insightful overview of both the basics and theoretical foundations for trend following. The book also includes in-depth coverage of more advanced technical aspects of systematic trend following. The book examines relevant topics such

Trend following as an alternative asset class Benchmarking and factor decomposition Applications for trend following in an investment portfolio And many more By focusing on the investor perspective, Trend Following with Managed Futures is a groundbreaking and invaluable resource for anyone interested in modern systematic trend following.

Genres: Finance

424 pages, Kindle Edition

First published January 1, 2014

Reviews

[Gary Antonacci · Rating 5 out of 5]

This is more than a just book concerning futures trading. It is relevant to anyone interested in trend following regardless of the markets that one trades. The book does an admirable job of defining the basis of trend following as divergent risk taking in contrast to convergent strategies such as buy-and-hold. Trend following is a risk-minimizing way of dealing with uncertainty, as well as a proven way to capture crisis alpha.

The authors show convincingly that non-optimized trend following can dramatically improve performance, and they do so over the longest back test I have ever seen covering 800 years of data. To me, that alone was worth the price of the book.

Greyserman and Kaminski looked at 84 markets covering equities, fixed income, foreign exchange, and commodities as they became available from 1223 to 2013. They established long and short positions that were rebalanced monthly based on the trend over the preceding 12 monthly. They point out that moving averages, in contrast to this, may change signs often which can lead to unwanted trading and associated trading costs.

Trend following showed an average annual return of 13% with an annual volatility of 11% and Sharpe ratio of 1.16, versus a return of 4.8%, volatility of 10.3%, and Sharpe ratio of 0.47 for buy-and-hold. Trend following also has positive skewness, while most asset classes without trend following have negative skewness. Positive skewness means the chance of left tail risk and large drawdowns is relatively small.

The largest drawdowns with trend following here were approximately 25% lower than with buy-and-hold, and the duration of those drawdowns was 90% shorter. Trend following also showed positive performance during periods of market turmoil and had a low correlation with traditional asset classes, interest rate regimes, and inflation.

I use a similar trend following method myself applied to stocks and bonds as described in my book, "Dual Momentum Investing". I was therefore grateful to the authors for providing this impressive validation of trend following based on an extremely long back test on 800 years of data.

[Grace Appler · Rating 4 out of 5]

Pros: covers various aspects of trend following rather comprehensively. Interesting point about divergence and convergence investing.

Cons: one of those books too superficial for professionals yet too technical for the public. Intuitions often lost in technical details. Qualitative conclusions drawn from over-simplified examples.

[ajay Kumar · Rating 4 out of 5]

good book for those who are interested in understanding the concept of trend following,,may not be relevant for all....