SI267: A Masterclass in Absolute vs Cross Sectional Momentum ft. Richard Brennan
Top Traders Unplugged
Introduction
Neil and Richard discuss the escalating tensions in the Middle East, rising geopolitical tensions in other hotspots, the impact of interest rates on Australia's export trade, and the significant boom in residential property prices in Australia.
In today’s episode, Richard Brennan takes us on a tour around the Australian economy and how the investment landscape is changing. We also discuss how different investment philosophies demand different interpretations and why the “one size fits all” approach does not exist, how cross-sectional momentum differs from absolute momentum. Lastly, we discuss why Richard uses an ensemble of trend following systems and why he always strives for maximum diversification, and why I feel we should not introduce divisiveness in the trend following industry and much more.
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Episode TimeStamps:
01:04 - What is happening in Australia at the moment?
07:53 - The investment landscape is changing
09:57 - Best UCITS Managed Futures Fund revealed
13:17 - Industry performance update
16:25 - Why does OJ keep rising?
19:54 - There is no "one size fits all" approaches
26:44 - How does cross-sectional momentum work?
31:12 - The importance of correlation
40:26 - Nuancing "treating all markets equally"
48:00 - The use of continuous signals
53:03 - How does absolute momentum works?
59:13 - Discussing sample size
01:01:30 - The principle of no selection bias
01:04:16 - Why Rich uses traditional risk measures
01:06:56 - Letting profits run to their conclusion
01:08:03 - Single asset level risk vs portfolio level risk
01:08:59 - Releasing the risk steam
01:10:37 - Using simple models
01:13:46 - Trend following - not so black and white?
01:22:45 - Thanks for hanging in there
01:24:11 - What's up for next week?
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