Trend-following with industry groups - It works

 

In the paper, "A Century of Profitable Industry Trends" the authors explore long-only trend following for a 48 industry portfolio for just under a one hundred year period. They find that the simple trend timing strategy will lead to higher returns, lower volatility, higher Sharpe ratio and less downside risk. This strategy is easy to implement and is shown to work with sector ETFs with a smaller portfolio of 31 industries. The numbers are compelling and again show that a trend strategy can be effective. The strategy is effect with equal weighting, timing and sizing allocations. It may not work during every period, but the long run return beat the simple strategy of holding the market portfolio.