When Simplicity Met Fragility
Simplicity can be surprisingly robust, but too much simplicity can be surprisingly fragile. We explore the limits of simplicity in trend equity strategies.
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Managing Equity Risk When Rates Rise
Managing equity risk when rates rise may be difficult for investors whose risk management plan relies exclusively on asset class diversification.
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Measuring Risk Tolerance
Risk tolerance is a tricky metric to measure. Riskalyze tries to intuitively quantify this, but be careful not to oversimplify this complex portfolio input.
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Decomposing Trend Equity
We decompose trend equity into a strategic allocation and an active trading strategy in effort to create better transparency around portfolio behavior.
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Video Digest: A Trend Equity Primer
A video digest of our most recent weekly research commentary on how trend equity strategies may help hedge left-tail risk in traditional portfolios.
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A Trend Equity Primer
An introduction to trend equity, a strategy that seeks to benefit from the long-term, expected equity risk premium and the convex payoff of trend following.
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The Misleading Lessons of History
Market history can be a potentially misleading guide to the future. Adding more noise to the past returns may create more signal for the future.
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Timing Equity Returns Using Monetary Policy
We explore the relationship between equity returns and contractionary/expansionary monetary policy regimes using a simple simulation-based framework.
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Video Digest: The State of Risk Management
We walk through our state of risk management research and show how diversification can prevent short-term underperformance and manage sequence risk.
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The State of Risk Management
We evaluate the state of risk management by exploring the historical performance of eight different risk-managed strategies over the last 20 years.
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Video Digest: Measuring Process Diversification in Trend Following
A video digest of our most recent weekly research commentary on measuring process diversification within the context of trend following strategies.
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Measuring Process Diversification in Trend Following
In this research commentary we seek to measure the potential diversification benefits of introducing new ways of measuring trends.
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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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Dollar-Cost Averaging: Improved by Trend?
The choice to lump sum invest (“LSI”) or dollar-cost average (“DCA”) 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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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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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
Naïve 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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