Trend Following with Managed Futures

FOREWORD

It is a rare pleasure and honor for an academic to be asked to write a foreword for a book coauthored by one of his charges, not unlike a parent seeing a child off to college and onto a successful career of her own. However, unlike parenthood, my experience with Katy Kaminski was considerably less challenging because she first showed up at my office more than a decade ago already well-trained in mathematics, statistics, and operations research, and an eager student of finance. Like most MIT students I’ve had the privilege of advising over the years, Katy did most of the driving; my role was largely to stay out of her way and cheer her on from the stands.

This book—coauthored with Alex Greyserman, a seasoned Wall Street veteran and PhD in statistics—is a fascinating and timely examination of an investment strategy that, for too long, has dwelt in the shadows of the financial industry. Trend following has received a bad rap among mainstream investors and portfolio managers for a number of reasons. Perhaps the most obvious is the natural preference for originality in any creative endeavor, whether it be in the arts or the sciences—why would you want to follow the crowd when you can do something unique?

This instinctive aversion to copycats belies the surprising frequency of copycat strategies found in nature, including herding behavior among most animal species, mimicking abilities such as the color shifting of chameleons, and the high-fidelity nature of DNA replication ...