Properties of Trend Following Returns

To understand how trend following performs over time, this chapter discusses several key statistical properties of trend following returns. First, two divergence‐focused performance measures, crisis alpha and crisis beta, which can be used to measure the complementary properties of trend following return are explained. Second, several key statistical properties of trend following returns are reviewed including total returns, crisis performance, correlation with equities, and skewness. These statistics represent different ways of understanding how trend following performs across time. A review of these statistics across pure trend following and other variants of trend following provides a view into how different approaches for system design can affect these statistical properties. The chapter focuses on aspects of trend following as an alternative asset class. Based on their divergent risk‐taking approach, trend following strategies are long market divergence.