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Rethinking Trend Following: Optimal Regime-Dependent Allocation

alphaarchitect

3 months ago

286 views

Most trend-following research focuses on signal construction: how to detect trends better, faster, or earlier. The paper asks a different question, and arguably a more important one for investors: once a market regime has been identified, what is the optimal portfolio exposure in that regime?

That is the central novelty of the paper which is available here.

Traditional time-series momentum strategies typically impose exposures mechanically. In the standard two-regime version, the investor...

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