Refining and Robust Backtesting of A Century of Profitable Industry Trends
Abstract
We revisit the long-only trend-following strategy presented in A Century of Profitable Industry Trends by Zarattini and Antonacci, which achieved exceptional historical performance with an 18.2% annualized return and a Sharpe Ratio of 1.39. While the results outperformed benchmarks, practical implementation raises concerns about robustness and evolving market conditions. This study explores modifications addressing reliance on T-bills, alternative fallback allocations, and industry exclusions. Despite attempts to enhance adaptability through momentum signals, parameter optimization, and Walk-Forward Analysis, results reveal persistent challenges. The results highlight challenges in adapting historical strategies to modern markets and offer insights for future trend-following frameworks.
Cite
@article{arxiv.2412.14361,
title = {Refining and Robust Backtesting of A Century of Profitable Industry Trends},
author = {Alessandro Massaad and Rene Moawad and Oumaima Nijad Fares and Sahaphon Vairungroj},
journal= {arXiv preprint arXiv:2412.14361},
year = {2024}
}