Learning From Capital Fund Management's "Two Centuries of Trend Following"

Trend following effects have been very stable and consistent across four asset classes (commodities, currencies, stock indexes and bonds) over the last two centuries.

In this article, Absolute Momentum will be used interchangeably with trend following or time series momentum. Relative Momentum will be used interchangeably with cross-sectional momentum or relative strength.


The paper explores trend-following strategies across four asset classes (commodities, currencies, stock indexes and bonds) over the last two centuries.

The paper finds that the trend following effect is very stable, across both time and asset classes, making the existence of trends one of the most statistically significant anomalies in financial markets. There is no sign of a statistical degradation of long trends, whereas shorter trends have significantly withered.

The performance is remarkably constant over two centuries. The overall performance is in fact positive over every decade in the sample.


Research Paper: Two centuries of trend following

Authors: Yves Lempérière, Cyril Deremble, Philip Seager, Marc Potters, Jean-Philippe Bouchaud

Company: Capital Fund Management

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