A Century of Evidence on Trend Following Investing

AQR

Brian Hurst

Research

26 Pages

AQR Capital Management examines whether trend following has delivered persistent returns across changing market environments since 1880. Using 137 years of futures and cash market data, the paper argues time series momentum remained profitable through wars, recessions, and eight of the ten worst 60/40 drawdowns.

Key Takeaways

Century Long Persistence: Time series momentum produced positive average returns in every decade from 1880 through 2016 across 67 global markets and four major asset classes.
Crisis Period Resilience: Trend following generated positive returns during 8 of the 10 worst 60/40 portfolio drawdowns, with average crisis periods lasting roughly 15 months.
Portfolio Diversification Benefits: A 20% allocation to time series momentum improved Sharpe ratios from 0.39 to 0.55 while reducing maximum drawdowns from -62.3% to -50.2%.
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