Refining and Robust Backtesting of A Century of Profitable Industry Trends
Alessandro Massaad, Rene Moawad, Oumaima Nijad Fares, and Sahaphon, Vairungroj

TL;DR
This paper critically examines a century-long industry trend-following strategy, addressing robustness issues and exploring modifications to improve adaptability in modern markets, with mixed success.
Contribution
It introduces modifications to a historical trend-following strategy, analyzing their impact on robustness and adaptability in contemporary market conditions.
Findings
Persistent challenges in adapting historical strategies to modern markets
Modifications improve some robustness aspects but do not fully resolve issues
Insights for future development of trend-following frameworks
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.
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Taxonomy
TopicsEconomic, financial, and policy analysis · Economic Theory and Institutions
