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Momentum's Magic Number
The performance of momentum strategies appears to peak when the formation period plus the holding period sum to between 12 and 18 months.
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Our Conversation with Adam Butler
The thoughts and commentary of the team at Newfound on our podcast conversation with Adam Butler.
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On Performance Commentary
Ex-post performance commentary is meaningless without ex-ante expectations. With appropriately set expectations, step-wise decomposition can be insightful.
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The New Glide Path
Investors have traditionally utilized a stock/bond glide path in order to control for sequence risk. Where does trend following fit in?
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Flirting with Models Podcast
Introducing Newfound Research's new podcast: Flirting with Models, the show that pulls back the curtain to meet the investors behind quant strategies.
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The Raw Materials for Active Management
Explaining why active management performs a certain way in an environment is tough. Predicting this difference is even harder. Diversification is key.
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Inferring the Statistics of Buffett's Alpha
What investors should take away from Buffett’s alpha is that discipline was crucial for realizing the long-term outperformance.
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Factor Fimbulwinter
We explore the evidence that would be required for us to dismiss established anomalies. We find that we would likely have to live through several careers.
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A Season for Sectors
Seasonality has proven to be a significant anomaly in a variety of markets. We test whether seasonality applies with sector-based investing and find that not only has the premium been economically significant, but is un-explained by traditional anomalies.
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Dollar-Cost Averaging: Improved by Trend?
The choice to lump sum invest (β€œLSI”) or dollar-cost average (β€œDCA”) is one fraught with emotion. Intuition tells us that LSI likely offers the best bet for long-term investors as markets, in general, tend to go up. However, can signals derived from simple trend models offer an edge?
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Separating Ingredients and Recipe in Factor Investing
Factor portfolio construction has two key elements: ingredients (the signals used to pick investments) and recipe (the rules used to translate those signals into allocations). While the ingredients often get the most focus, the recipe can have just as large of an impact on returns.
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How to Benchmark Trend-Following
Benchmarking a trend-following strategy is difficult. The tendency is to compare it to an equity strategy, but this often leads to disappointment. We explore a better benchmark that allows investors to accurately measure performance and set expectations.
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Leverage and Trend Following
We typically explore trend following as a risk management technique for investors sensitive to sequence risk, but it may also be a way to allow growth investors to benefit from leverage by reducing the risk of permanent portfolio impairment that would otherwise occur due to large drawdowns.
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The Importance of Diversification in Trend Following
Single-asset trend following strategies can play a meaningful role in investor portfolios, but success requires introducing sources of diversification within the strategy. We believe the increased internal diversification allows not only for a higher probability of success.
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Risk Ignition with Trend Following
Trend following strategies may represent a beneficial diversifier for conservative portfolios going forward, potentially allowing investors to more fully participate with equity market growth without necessarily fully exposing themselves to equity market risk.
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Benchmarking, Behavioral Biases, and the March Madness Tournament Challenge Recap
Our 2018 March Madness challenge is all wrapped up! In this post, we highlight many of the same pitfalls with benchmarking and behavioral biases that we see in investing.
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Failing Slow, Failing Fast, and Failing Very Fast
Failure to meet your financial objectives can take one of two forms: fast failure and slow failure. Failing fast involves suffering large losses at the wrong time as the result of taking too much risk. Failing slow involves achieving insufficient growth due to taking too little risk.
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Diversifying the What, How, and When of Trend Following
NaΓ―ve and simple long/flat trend following approaches have demonstrated considerable consistency and success in U.S. equities. We explore how investors can think about introducing greater diversification across the three axes of what, how, and when in effort to build a more robust tactical solution.
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Newfound 2018 March Madness: Final Four Update
Here is the Final Four update for our 2018 March Madness Bracket Challenge. Our rules are not your typical bracket rules; we isolate the skill from the luck! Find out what the next two rounds could have in store for your bracket.
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Protect & Participate: Managing Drawdowns with Trend Following
For investors looking to diversify how they manage risk, we believe the trend following represents a high transparent, and historically effective, alternative.
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