Economic Trend

20 Pages Posted: 21 Feb 2024

See all articles by Jordan Brooks

Jordan Brooks

AQR Capital Management, LLC

Noah Feilbogen

AQR Capital Management, LLC

Yao Hua Ooi

AQR Capital Management, LLC

Adam Akant

AQR Capital Management, LLC

Date Written: January 30, 2024

Abstract

In this paper we present a novel approach to investing across equity, bond, currency and commodity markets. “Economic trend” capitalizes on the tendency for new information to have a persistent impact on asset prices by positioning in each market on the basis of trends in macroeconomic fundamentals. The strategy has realized consistently attractive risk-adjusted returns over a 50+ year sample, and performance is pervasive across both markets and measures. It exhibits low correlation to traditional risk premia on average and tends to perform exceptionally well during drawdown periods for traditional asset classes. While economic trend is a close relative of price trend-following—both approaches aim to capitalize on the tendency of markets to systematically under-react to news—the two strategies are highly complementary. Combining the two leads to improved risk-adjusted performance and more robust drawdown protection than price trend-following alone.

Keywords: Asset Pricing, International Financial Markets, Trend Following, Momentum, Managed Futures, CTA, Global Macro, Hedge Funds

Suggested Citation

Brooks, Jordan and Feilbogen, Noah and Ooi, Yao Hua and Akant, Adam, Economic Trend (January 30, 2024). Available at SSRN: https://ssrn.com/abstract=4710868 or http://dx.doi.org/10.2139/ssrn.4710868

Jordan Brooks (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Noah Feilbogen

AQR Capital Management, LLC ( email )

Yao Hua Ooi

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Adam Akant

AQR Capital Management, LLC ( email )

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