Trend Following With Managed Futures [Book Review]

Trend Following With Managed Futures [Book Review]

Trend Following With Managed Futures: Book Review by Mark S. Rzepczynski, CFA Institute

Trend Following with Managed Futures: The Search for Crisis Alpha. 2014. Alex Greyserman and Kathryn Kaminski.

Price-based investment strategies have come a long way since 25 years ago, when the consensus was that markets were weak-form efficient, with past prices being unable to tell us anything about future behavior. Investors are warming to this active investment style approach, even though trend following has often been associated with “noise” traders and theoretical technical analysis. Some consider the empirical evidence supporting momentum trading to be an empirical puzzle that cannot be reconciled with theory, yet it has become such a popular topic with some finance researchers that it is referred to as the fourth factor alongside the market, size, and value factors of the Fama–French three-factor model.

Discussion of price- or return-based strategies has involved two types: momentum, the ability of past return performance to tell us something about relative future performance; and trend following, the ability of past prices to tell us something about absolute future price performance. This distinction is somewhat exaggerated when, in fact, the foundation is the same: Past price or return patterns have memory and will continue in the future, albeit w