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Trends everywhere? The case of hedge fund styles

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  • Charles Chevalier

    (KeyQuant
    Université Paris-Dauphine, PSL Research University)

  • Serge Darolles

    (Université Paris-Dauphine, PSL Research University)

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.

Suggested Citation

  • Charles Chevalier & Serge Darolles, 2019. "Trends everywhere? The case of hedge fund styles," Journal of Asset Management, Palgrave Macmillan, vol. 20(6), pages 442-468, October.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:6:d:10.1057_s41260-019-00141-5
    DOI: 10.1057/s41260-019-00141-5
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    More about this item

    Keywords

    Managed Futures; Time-series momentum; Trend following; Commodity Trading Advisor (CTA); Hedge funds; Trading strategies;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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