Trend Following - data showing the results

L

laurentc

Dear all,

I am looking for some data / results of Trend Following Strategies as a whole.


I found there are several well-known indices, such as the ZCM/MAR Trend-Follower Advisors Index, the S&P TFI, or the CISDM Trend Follower sub-index.


However, I am not able to find these data on their websites.

Could someone help me a little to get some of these statistics?

Thanks a lot.
 
Quote from jtanko:

I remember reading Michael Covel's
book on trend following. It has good
data to back up his claims.
You can see it here:
http://www.michaelcovel.com

Cheers,
Jakab
More...

Thanks JTanko.

I was on his website, but I was not able to find the statistics I would like. I saw some graphs that do not have the lastest statistics.


Did you remember if you saw the exact data he used? (I am loking for the numerical data to make my own statistics on these)
 
Perhaps such a project is doomed to inconclusiveness beforehand. Within the very idea itself, there are numerous intrinsic problems, even if you were able to lay hands on mountains and mountains of the quantitative data that you crave:
  • Some private money managers (including trendfollowers) do not report their results externally to anyone, so they do not appear in any database. Are the statistics of this sub-population identical to the statistics of the group who do report? Probably not; there's a good chance the quiet ones outperform, but by definition it is impossible to find out. So you are doomed to study only those trendfollowers who report.
  • Survivorship bias: does your raw data include trendfollowers who failed and dropped out of the databases? How about those trendfollowers who said "We will start a new fund, trade for 12 months, and if our track record is good, only then will we begin reporting, otherwise we'll quietly fold up the tent and close the fund." The ones who folded the tent do not appear in any database.
  • The lack of a bright line separating trendfollowing from other investment strategies. Many managers run "multi strategy funds" which blend trendfollowing, pattern recognition, and countertrend strategies in an attempt to furnish a smooth equity curve to investors, and the great bulk of money under management is run this way. How do you decide whether or not to include the results of a given fund F in the "trendfollowing" category? If the manager self-categorizes her fund as a trend follower? (Remember that this is done for marketing reasons rather than academic purity).
It may be more fruitful to mimic the approach of Richard Spurgin's paper A Benchmark for Commodity Trading Advisor Performance from CISDM. He creates a mechanical trading system which, by design, is an academically pure trendfollower. He optimizes the parameters to maximize the correlation between the system's performance and the performance of the Barclay Systematic Traders Index. Now he can generate all the data he could ever want. He can vary the time period, vary the portfolio, vary the aggressiveness of trading. He can create his own multi-asset-class blends (by mixing in the Lehman Bond index, or the Russell 3000, or ...). Entirely more flexible.
 
the dean of trend following, john henry, has suffered major loses over the last 3 years. if he cant find a trend, with the most capital and resources in history, good luck to you!

FYI--here's a piece of his investor letter "explaining" the problem---

<i>"The John W. Henry & Company, Inc. (JWH) investment programs all ended the year with negative returns. The combination of historically low and damaging spikes in volatility, produced a poor environment for JWH’s trading system.

However, currency markets as representedby the euro below, were plagued by investors“overreacting” to economic data and central bank statements as a lack of sustained volatility kept traders and therefore markets in search of emerging trends.

While the value of the euro did strengthen against the U.S. dollar, the trend began with a damaging reversal. ( i love this one, a damaging reversal)

This provides an excellent example of how restrictive ranges and spikes in volatility combined to result in an uncharacteristic performance year for JWH programs.</i>"
 
Quote from MGJ:



[*]Survivorship bias: does your raw data include trendfollowers who failed and dropped out of the databases? How about those trendfollowers who said "We will start a new fund, trade for 12 months, and if our track record is good, only then will we begin reporting, otherwise we'll quietly fold up the tent and close the fund." The ones who folded the tent do not appear in any database.
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Indeed. There's potentially a good example of this problem in the making with Matador Fund, which apparently has not reported results since mid 06' after large losses and probably redemptions rocked Mr Niederhoffer's ship. Since, it seems that anyone who really knows whats going on has been tight lipped.

So it makes me wonder, will Niederhoffer end up being of the contingent who only report results when they are palatable and simply not report when he has poor performance? Seems very disingenuous to me and casts a poor light on CTAs as a whole.

I believe that CTAs could increase the validity of their industry as an asset class if they had a governing body to penalize funds that behave in the behavior described above. It's a shame. Of course, there are noteworthy exceptions, such as ET's own Aaron Schindler, who in the midst of a 40%+ drawdown kept trading and REPORTING his results with nothing to hide, this was in 04' I believe and he came back beautifully. Last year, he was up 25%+. I really wish more CTAs would have the fortitude and honesty displayed by Aaron.
 
Thanks for your answers.

I understand you do not want me to invest on Trend Following strategies.

Good news: I do not want to :D


I would like to find statistics on Trend Following indices to confirm that their risk-adjusted return ratio is pool over the long run... (even if some did perform well, such as John Henry in the 90's...)
 
Quote from laurentc:

Thanks for your answers.

I understand you do not want me to invest on Trend Following strategies.

Good news: I do not want to :D


I would like to find statistics on Trend Following indices to confirm that their risk-adjusted return ratio is pool over the long run... (even if some did perform well, such as John Henry in the 90's...)
More...

I think that in general, CTAs have very poor sharpe ratios relative to hedge funds, but don't quote me on that. Probably because their risk profile is that of being a long option like investment, with large standard deviations of returns. The only real benefit I can think of that most CTAs can offer is that of non correlation to traditional equity indices. But as far as outperformance vs the S&P with less or equal volatility, it looks like that over a long period of time, it's just not happening...

As one poster said above however, we do not know what the results are of those funds who choose not to report. The population mean/variance may be very different from the traditional cta indices. So good luck in trying to 'prove' that negative.
 
Quote from Maverick1:

I think that in general, CTAs have very poor sharpe ratios relative to hedge funds, but don't quote me on that. Probably because their risk profile is that of being a long option like investment, with large standard deviations of returns. The only real benefit I can think of that most CTAs can offer is that of non correlation to traditional equity indices. But as far as outperformance vs the S&P with less or equal volatility, it looks like that over a long period of time, it's just not happening...

As one poster said above however, we do not know what the results are of those funds who choose not to report. The population mean/variance may be very different from the traditional cta indices. So good luck in trying to 'prove' that negative.
More...


I will not try to 'prove' the Trend Followers are poor managers as a whole.

I fully understand the results are biased.

However, I would want to study these 'biased' results to be able to confirm my mind.

No one ever see stastitics figures of a group of Trend Followers?
 
Quote from laurentc:

I will not try to 'prove' the Trend Followers are poor managers as a whole.

I fully understand the results are biased.

However, I would want to study these 'biased' results to be able to confirm my mind.

No one ever see stastitics figures of a group of Trend Followers?
More...

http://www.trendfollowing.com/whitepaper/trendfollowing.pdf

This is one of the few studies I've seen that has statistics, but it only covers 94-03'. Maybe you could email Graham Capital and ask them for the updated version if they have one?

It's great that you're aware of the pitfalls of statistical inference based on incorrect/incomplete data. Knock yourself out studying this and it would be great if you could then come back and let ET know what you found.

Good Luck
M1
 
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