Trend Following

hen I was a young account executive with Merrill Lynch in the mid-1970s, I became friendly with the top producer in our office. One day he shared with me one of the secrets of his success – he would only promote stocks when a certain percentage of Dow Jones Industrial stocks were above their 39-week…

Time Series Momentum

Moskowitz, Ooi, and Pedersen recently posted a paper on SSRN called “Time Series Momentum.” This same paper was published in last month’s Journal of Financial Economics. Most momentum papers deal with cross-sectional momentum in which a security’s outperformance relative to its peers predicts future relative outperformance. In time-series momentum, a security’s own past excess return predicts its future…

Absolute Momentum Revisited

Trend following based absolute momentum is still little known and hardly used by investors. Yet it can be a powerful tool, leading to both enhanced long-run return and especially to reduced risk during bear markets. The more common type of momentum, based on relative strength or cross-sectional momentum, has little or no ability to reduce…