Trends everywhere? The case of hedge fund styles

Charles Chevalier and Serge Darolles
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Charles Chevalier: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper investigates empirically whether time-series momentum returns can explain the performance of hedge funds in the cross section. Relying on the trend-following literature, a volatility-adjusted time-series momentum signal is applied on a daily basis across a large set of futures, covering the major asset classes. We build a hierarchical set of trend factors: the full version TREND can be split in summable factors across two dimensions: the horizon of the signals and the traded asset class. We show that Managed Futures, Global Macro and Fund of Hedge Funds strategies can be partly explained by a TREND exposure. Moreover, a TREND exposure is a significant determinant of hedge funds returns at the fund level, for Managed Futures and Global Macro but also, and more surprisingly, for the other styles.

Keywords: Managed Future; Time Series Momentum; Trend-Following; Commodity Trading Advisor (CTA); Trading Strategies (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

Published in Journal of Asset Management, 2019, 20 (6), ⟨10.1057/s41260-019-00141-5⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02573075

DOI: 10.1057/s41260-019-00141-5

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