Why can the ‘trend can be your friend’, as well as your absolute nightmare? There are a few reasons why momentum tends to persist across time and asset classes, why it can lead to outperformance, and crucially, how its downsides can reinforce these facts.
If you’ve been around financial markets, chances are you’ve heard the saying that ‘the trend is your friend.’ While simplistic, this references a statistical anomaly that challenges the efficient markets hypothesis, and which is exhibited time and again.
