RT Journal Article
SR Electronic
T1 Uncovering the Trend-Following Strategy
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 94
OP 102
DO 10.3905/jpm.2004.443327
VO 31
IS 1
A1 Henrik H. Pedersen
A1 Gerben J. de Zwart
YR 2004
UL https://pm-research.com/content/31/1/94.abstract
AB Trend-following strategies use past price performance in an attempt to predict future price performance. While widely applied in currency markets with a good track record for major currency pairs, the strategies do not apply universally. Under what conditions does trend-following work or fail to work? A new model created from simulations and later verified on G10 currency pairs assesses trend model profitability from the statistical features of the return distribution of the asset under consideration. The results and examples facilitate the selection of appropriate currencies or assets for inclusion in trend models going forward.