Public research brief
A strategy can occasionally win big even when its expected return is zero.
Sepp and Lucic separate the mechanics of trend-following payoffs from the market behavior that pays for them. Their framework connects performance to return persistence, drift, filter length and trading costs.
One striking result is that aggregated trend returns can exhibit positive skewness even under a zero-drift white-noise model. That makes a good research question: are we being paid for predictability, or simply admiring the shape of the payoff?
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