Trend-following hedge funds and multi-period asset allocation

Dries Darius, Aytac Ilhan, John Mulvey, Koray Simsek and Ronnie Sircar

Quantitative Finance, 2002, vol. 2, issue 5, 354-361

Abstract: Selected hedge funds employ trend-following strategies in an attempt to achieve superior risk-adjusted returns. We employ a lookback straddle approach for evaluating the return characteristics of a trend-following strategy. The strategies can improve investor performance in the context of a multi-period dynamic portfolio model. The gains are achieved by taking advantage of the funds' high level of volatility. A set of empirical results confirms the advantages of the lookback straddle for investors at the top end of the multi-period efficient frontier.

Date: 2002
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DOI: 10.1088/1469-7688/2/5/304

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