A Century of Evidence on Trend-Following Investing

Abstract

In this article, the authors study the performance of trend-following investing across global markets since 1880, extending the existing evidence by more than 100 years using a novel data set. They find that in each decade since 1880, time series momentum has delivered positive average returns with low correlations to traditional asset classes. Further, time-series momentum has performed well in 8 out of 10 of the largest crisis periods over the century, defined as the largest drawdowns for a 60/40 stock/bond portfolio. Lastly, time series momentum has performed well across different macro environments, including recessions and booms, war and peacetime, high- and low-interest rate regimes, and high- and low-inflation periods.

Keywords: trend-following, time series momentum, managed futures, CTA, hedge funds, alternative investments

JEL Classification: G02, G11, G12, G13, G14, G23