System from Trend Following Factors

June 1, 2012

(This article was first published on Timely Portfolio, and kindly contributed to R-bloggers)

As I thought more about Trend Following Factors from Hsieh and Fung, I thought that the trend following factors might indicate a state/regime for the equity markets that could potentially offer momentum-style timing signals for a system on the S&P 500.  Now, THIS ABSOLUTELY SHOULD NOT BE CONSIDERED INVESTMENT ADVICE, especially since the factor data is very lagged and the testing is nowhere near comprehensive enough.  I will however try to replicate the factor methodology to get a more real-time indicator extended to any index in another post. What is most interesting to me is that this is ex-ante intuitive and the signal is just basic statistics.

From TimelyPortfolio
From TimelyPortfolio
From TimelyPortfolio

Comments have been very light. Please let me know your thoughts.

R code from GIST:

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