{"id":40890438,"date":"2024-08-03T09:40:18","date_gmt":"2024-08-03T04:10:18","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890438"},"modified":"2024-08-03T09:40:18","modified_gmt":"2024-08-03T04:10:18","slug":"trend-factor","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2024\/08\/03\/trend-factor\/","title":{"rendered":"Trend Factor"},"content":{"rendered":"\n

Han, Yufeng and Zhou, Guofu and Zhu, Yingzi, A Trend Factor: Any Economic Gains from Using Information over Investment Horizons?<\/em> (SSRN<\/a>), outlines the construction of a trend factor for equities.<\/p>\n\n\n\n

\n

In this paper, we provide a trend factor that captures simultaneously all three stock price trends: the short-, intermediate-, and long-term, by exploiting information in moving average prices of various time lengths whose predictive power is justified by a proposed general equilibrium model. It outperforms substantially the well-known short-term reversal, momentum, and long-term reversal factors, which are based on the three price trends separately, by more than doubling their Sharpe ratios.\u00a0<\/p>\n<\/blockquote>\n\n\n\n

Does the paper’s claim hold true for Indian equities? Not really.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The Long-only Trend Factor underperformed a na\u00efve momentum strategy and its corresponding benchmark. The Long-short Trend factor returns was negative. <\/p>\n\n\n\n

Even after “tuning” the look-back periods, the Trend Factor failed to beat momentum.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Constructing a portfolio of stocks using trend following seems to be a dead end. Our previous attempts at this — Dynamic Linear Model v1.0<\/a> and Dynamic Equity Trend-following<\/a> — have yielded similar results as well.<\/p>\n\n\n\n

Momentum beats Trend-Following.<\/p>\n\n\n\n

Code and charts are on github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Han, Yufeng and Zhou, Guofu and Zhu, Yingzi, A Trend Factor: Any Economic Gains from Using Information over Investment Horizons? (SSRN), outlines the construction of a trend factor for equities. In this paper, we provide a trend factor that captures simultaneously all three stock price trends: the short-, intermediate-, and long-term, by exploiting information in … <\/p>\n","protected":false},"author":2,"featured_media":2091073,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[2761,3793],"class_list":["post-40890438","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-quant","tag-trend-following","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=40890438"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890438\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2091073"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}