01 Dec Learning From Transtrend's "Potential Profitability for Trend Following Systems"
The paper describes a backward looking measure, “trendpot”, which indicates whether a medium to long term trend following system would potentially have been profitable when applied to that particular market during the preceding month.
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 describes a backward looking measure, “trendpot”, which indicates whether a medium to long term trend following system would potentially have been profitable when applied to that particular market during the preceding month.
Therefore “trendpot” can be used to evaluate trend following system’s performance. For example, we can focus on evaluating scenarios when “trendpot” is high, indicating supposed profitability, whereas the trend following system being evaluated failed to produce profits.
Research Paper: Potential Profitability for Trend Following Systems
Authors: Transtrend B.V.
Company: Transtrend B.V.
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