Breaking Bad Trends

30 Pages Posted: 3 Jun 2020 Last revised: 1 Feb 2024

See all articles by Christian L. Goulding

Christian L. Goulding

Auburn University - Harbert College of Business

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Michele G. Mazzoleni

STRS Ohio

Date Written: October 5, 2023

Abstract

We document and quantify the negative impact of trend breaks (i.e., turning points in the trajectory of asset prices) on the performance of standard monthly trend-following strategies across several assets and asset classes. In the years of the U.S. economy’s expansion following the global financial crisis of 2008, we find an increase in the frequency of trend breaks, which helps explain the lower performance of these trend strategies during this period. We illustrate how to repair such strategies using a dynamic trend-following approach that exploits the return-forecasting properties of the two types of trend breaks: market corrections and
rebounds.






Goulding, Christian L. and Harvey, Campbell R. and Mazzoleni, Michele, Breaking Bad Trends (14 January 2024). Financial Analysts Journal, 2024, 80(1): 84-98. DOI: 10.1080/0015198X.2023.2270084






Also see our related paper: Momentum Turning Points

Keywords: Time-Series Momentum, Volatility Timing, Market Timing, Asset Pricing, Trend Following, Turning Points, Momentum Speed, Mean Reversion, Behavioral Finance

JEL Classification: G12, G13

Suggested Citation

Goulding, Christian L. and Harvey, Campbell R. and Mazzoleni, Michele, Breaking Bad Trends (October 5, 2023). Available at SSRN: https://ssrn.com/abstract=3594888 or http://dx.doi.org/10.2139/ssrn.3594888

Christian L. Goulding

Auburn University - Harbert College of Business ( email )

Auburn, AL 36849
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michele Mazzoleni

STRS Ohio ( email )

OH
United States

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