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Roberto Croce - Trend and Carry Within Assets, Across Assets, and Over Time (S6E8)
Flirting with Models
The Effects of Beta on Risk Management
When we talk about those three axes of within an asset class across asset class and over time. You use trend following to help manage risk over time, but not carry. Why not use carry on that third axis? So the reason is because of beta. It turns out that carry is informative if you want to time beta. And it works really well for that. But when we neutralize each asset class relative to its own average carry or ball measure,. We no longer have beta in the cross section of each of these asset classes returned. Once we do that, it turns out that the carries no longer predictive through time. When you put trending carry together though, the impact is pretty profound.
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