Sandy Brasher turned me onto a piece by Harry Long. Some of his article is off target, and a clear misunderstanding of trend following (“The most popular trend following system is the Golden Cross/Death Cross”), but his passage I liked to some degree (it’s not complete):
When examined in this light, it is not actually statistically interesting to determine if trend following is a holy grail. It is statistically interesting to understand that by engaging in trend following vs. buy-and-hold, one is quite literally exchanging one set of risks for another. Strategies are not about trading assets — they are about trading risk factors. And it appears that buy-and-hold risk factors are more widely held in portfolios than trend following risk factors. Markets have cruel methods for correcting such imbalances.
The key: what are those risk factors? That’s what is not complete.