Trend Following the Greek Equity Markets

Trend Following the Greek Equity Markets

June 29, 2015 Uncategorized
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(Last Updated On: June 29, 2015)

Long-Term trend-following saved the day in the Greek Equity markets…
FTSE/Athens Stock Exchange Large Cap Index, which consists of 25 of the largest and most liquid stocks that trade on the Athens Stock Exchange.
The purple line is the 250 day simple moving average line.
There was some chop in July-August 2014, but the system had you sitting in cash/tbills while the market blew up.
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

We’ll have to see what happens  during the current chaos. But if history is our guide, when the equity market gets back on trend, it will probably be a great time to do some good old fashioned value-investing.

Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.

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Definitions of common statistics used in our analysis are available here (towards the bottom)

About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes,, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.

  • Doug01

    You, and others, have made compelling arguments for the use of trend following as a risk management tool. In other words, trend following can be used to help decide exit point from stocks.

    Can trend following be used to determine entry points at the stock or industry or sector or market level?

    Michael Batnick, a CFA who is the director of research at Ritholz Wealth Management is the author of the above link. He presents data using the 10 month moving average of the Dow Jones Industrial Average, price return only. When the moving average is increasing by more than 1%, he considers that an uptrend. When it’s decreasing by more than 1%, he considers that a downtrend. He then gives average monthly performance when in uptrend, downtrend and trendless.

    42% of the time, the market is trendless, and the average monthly return is 0.13%. 40% of the time, the market is uptrending, and the average monthly return is 2.03%. 18% of the time, the market is downtrending, and the average monthly return is minus 1.76%. 42% of all losses occur when the market is downtrending.

    Should you avoid buying stocks when the moving average is decreasing by more than 1%?

    The following is a link to a paper from AQR:

    “we find strong positive predictability from a security’s own past returns for a set of 58 diverse futures and forward contracts that include country equity indices, currencies, commodities and sovereign bonds over more than 25 years of data. We find that the past 12-month excess return of each instrument is a positive predictor of its future return. This time series momentum or “trend” effect persists for about a year and then partially reverses over longer horizons.”