The Long and Short of Trend Followers
Posted: 9 Sep 2016 Last revised: 31 Oct 2017
Date Written: October 27, 2017
Abstract
We propose the use of short and long portfolios of trend-following strategies to analyse their risk and return characteristics. We present evidence for the asymmetric profitability of trend-following strategies that returns to their long side are more profitable. We find also that the exposures of CTAs to the long and short sides of trend-following strategies have become more biased towards long positions. The main lesson of our study is that the long and short sides should be differentiated in the analysis of dynamic investment strategies.
Keywords: Trend followers; trading position; risk exposure
JEL Classification: G11, G14, G23
Suggested Citation: Suggested Citation