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 - Dra
