Breaking the Trend: How to Avoid Cherry-Picked Signals
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arXiv
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| Format: | Preprint |
| Publié: |
2025
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| _version_ | 1866908739061153792 |
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| author | Valeyre, Sebastien |
| author_facet | Valeyre, Sebastien |
| contents | Our empirical results show an impressive fit with the pretty complex theoretical Sharpe formula of a trend-following strategy depending on the parameter of the signal, which was derived by by Grebenkov and Serror (2014). That empirical fit convinces us that a mean-reversion process with only one time scale is enough to model, in a pretty precise way, the reality of the trend-following mechanism at the average scale of CTAs and as a consequence, using only one simple EMA, appears optimal to capture the trend. As a consequence, using a complex basket of different complex indicators as signal, do not seem to be so rational or optimal and exposes to the risk of cherry-picking. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2504_10914 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Breaking the Trend: How to Avoid Cherry-Picked Signals Valeyre, Sebastien Portfolio Management Our empirical results show an impressive fit with the pretty complex theoretical Sharpe formula of a trend-following strategy depending on the parameter of the signal, which was derived by by Grebenkov and Serror (2014). That empirical fit convinces us that a mean-reversion process with only one time scale is enough to model, in a pretty precise way, the reality of the trend-following mechanism at the average scale of CTAs and as a consequence, using only one simple EMA, appears optimal to capture the trend. As a consequence, using a complex basket of different complex indicators as signal, do not seem to be so rational or optimal and exposes to the risk of cherry-picking. |
| title | Breaking the Trend: How to Avoid Cherry-Picked Signals |
| topic | Portfolio Management |
| url | https://arxiv.org/abs/2504.10914 |