How Network Momentum Reshapes Trend-Following in Commodity Futures
Follow the Leader
Trend-Following Is Not Broken, It Is Incomplete
Trend-following has survived wars, inflation regimes, and market crashes because it captures a deep structural feature of financial markets: persistence. Prices that move tend to keep moving, not because markets are inefficient forever, but because information diffuses slowly and unevenly. This persistence gives trend strategies their distinctive payoff profile, frequent small losses punctuated by rare but large gains.
Yet classical trend-following is fundamentally myopic. It looks inward, treating each market as an isolated process whose past alone determines its future. This assumption becomes increasingly fragile in a world where markets are globally connected, supply chains transmit shocks across sectors, and capital reallocates across asset classes at machine speed.
The study (https://www.quantpaper.com/paper/d694bdd5-0fe1-4d30-9192-01adf3e9440b) proposes a sharp extension to the traditional framework. Instead of asking whether a market is trending, it asks a more powerful question: who is leading, and who is following. By converting cross-market lead-lag effects into a network-based momentum signal, the study shows that trend-following can be made structurally richer, statistically stronger, and materially more robust.
