SI278: Trend Following Risk Premium...is it there & could it go away? ft. Rob Carver

Jan 13, 2024

Rob Carver, quantitative analyst and author, discusses the potential disappearance of the Trend Following risk premium, managing exogenous and endogenous risks, trading single stocks vs. stock indices in a multi-asset trend program, the irony of the newly approved crypto ETF, and the changing nature of bitcoin.

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INSIGHT

Commodity Market Activity

Early indications suggest market activity is concentrated in commodities, particularly gas.
This contrasts with the narrative of a soft landing and gently decreasing interest rates.

ANECDOTE

Discretionary Call on Interest Rates

Rob Carver made a discretionary call on interest rates peaking, adjusting his portfolio's equity-bond allocation.
He prefers long-dated bonds for duration risk in his non-leveraged portfolio.

INSIGHT

Trend Following Risk Premium

The long-term expectation for the trend-following risk premium is debated, with some arguing for its decline.
Its sustainability depends on factors like human behavior and market dynamics.

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Rob Carver returns to the show to discuss whether there is a risk that the Trend Following risk premium could one day disappear and how he manages exogenous and endogenous risks in a trend following system, how he thinks of trading single stocks instead of stock indices in a diversified multi-asset trend program and what the minimum lookback period would be, in order to be considered “long term”. We also discuss the irony of the newly approved crypto ETF, how the nature of bitcoin has changed and much more.

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Episode TimeStamps:

00:23 - What has caught our attention recently?

10:14 - Industry performance update

11:26 - Q1, Norbert: What is the long-term expectation for the trend-following risk premium as measured by the SG Trend Index after costs and its stability or sustainability?

19:46 - Q2, Bruno: What is Rob's method for balancing endogenous and exogenous risk management and controls in a system

29:36 - Q3, Oliver: What is Rob's take on trading single stocks instead of stock indecies in a diversified multi-asset trend program

37:57 - Q4, Critter: What would the minimum lookback period be to be considered "long term"?

41:59 - Q5, Chris: Can you share a couple names of software companies that do robust backtesting of trade strategies

45:57 - Cypto ETFs have been approved!

52:42 - Allocating to bitcoin

01:04:31 - Looking into 2024

01:08:38 - Thanks for listening

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