SI405: Why Most Trend Following Improvements Should Fail ft. Rob Carver

Trend following investors are constantly searching for ways to improve performance, but not every improvement survives contact with reality. Rob Carver joins Niels Kaastrup-Larsen to explore whether investors should chase the strongest trends, how different asset classes contribute to returns across market cycles, and why overfitting remains one of the biggest dangers in systematic investing. They also discuss the rise of AI generated trading strategies, the debate around perpetual futures, the changing role of economic data, and what diversification really means when markets become driven by a handful of dominant forces.

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Episode TimeStamps:

00:00 - Introduction and summer optimism in the UK

02:10 - Middle East developments, SpaceX and the new Fed Chair

06:13 - Concerns about economic data and market transparency

10:38 - Trend following performance and current market positioning

14:39 - How Rob evaluates strategies and portfolio construction

19:57 - The factor zoo and true sources of return

22:37 - What trend following adds beyond traditional risk premia

29:54 - The rise of perpetual futures and exchange concerns

42:35 - Quantica research on trend performance across asset classes

55:01 - Why commodities have become a dominant source of trend returns

56:06 - AI generated trading strategies and the risk of overfitting

01:05:48 - Drawdowns, diversification and lessons from recent research

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