Performance and persistence of commodity trading advisors: Parametric evidence

[en] We re-examine the performance of Commodity Trading Advisors (CTAs) over the January 1995 to October 2008 period. We compare abnormal performance based on a number of alternative existing models, as well as a category-specific model introducing asset-, option-, and moments-based factors. Taking more factors into account significantly raises the explanatory power, and 9 out of 12 CTA categories significantly outperform the market. We find that numerous CTAs show persistence over a horizon of at least three months and they are also more likely to be persistent over a longer period. Yet, most of the persistence fades away upon the “acid test” of considering only the top and bottom quartiles of CTAs.

Disciplines :

Finance

Author, co-author :

Gregoriou, Greg; State University of New York, Plattsburgh > Department of Finance

Hübner, Georges ; Université de Liège - ULiège > HEC-Ecole de gestion : UER > Gestion financière

Kooli, Maher; Université du Québec à Montréal - UQAM > School of Business and Management

Language :

English

Title :

Performance and persistence of commodity trading advisors: Parametric evidence

Publication date :

2010

Journal title :

Journal of Futures Markets

ISSN :

0270-7314

eISSN :

1096-9934

Publisher :

John Wiley & Sons, Inc. - Business, Hoboken, United States - New Jersey

Volume :

Issue :

Pages :

725-752

Peer reviewed :

Peer Reviewed verified by ORBi

Available on ORBi :

since 09 June 2010

Statistics

Number of views

127 (5 by ULiège)

Number of downloads

3 (0 by ULiège)

More statistics

Scopus citations^®

Scopus citations^®
without self-citations

OpenCitations

OpenAlex citations

Bibliography

Agarwal, V., & Naik, N. Y. (2002). Multi-period performance persistence analysis of hedge funds. Journal of Financial and Quantitative Analysis, 35, 327-342.
Agarwal, V., & Naik, N. Y. (2004). Risks and portfolio decisions involving hedge funds. Review of Financial Studies, 17, 63-98.
Bhardwaj, G., Gorton, G. B., & Rouwenhorst, K. G. (2008). Fooling some of the people all of the time: The inefficient performance and persistence of commodity trading advisors (NBER Working Paper No. W14424).
Brorsen, B. W. (1998). Performance persistence for managed futures (working paper). Oklahoma State University, Oklahoma.
Brorsen, B. W., & Townsend, J. (2002). Performance persistence for managed futures. Journal of Alternative Investments, 4, 57-61.
Brown, S. J., Goetzmann, W. N., & Ibbotson, R. G. (1999). Offshore hedge funds: Survival and performance 1989-2005. Journal of Business, 72, 91-117.
Brown, S. J., Goetzmann, W. N., & Park, J. (2001). Careers and survival: Competition and risk in the hedge fund and CTA industry. Journal of Finance, 56, 1869-1886.
Capocci, D. (2005). CTA performance, survivorship bias, and dissolution frequencies, In G. N. Gregoriou, V. N. Karavas, F.-S. Lhabitant, & F. Rouah (Eds.), Commodity trading advisors: Risk performance analysis and selection. Hoboken, NJ: Wiley.
Carhart, M. (1997). On persistence in mutual fund performance. Journal of Finance, 52, 57-82.
Carpenter, J., & Lynch, A. (1999). Survivorship bias and attrition effects in measures of performance persistence. Journal of Financial Economics, 54, 337-374.
Christensen, R. (1990). Log-linear models. New York: Springer.
Diz, F. (1996). Is performance related to survival? (working paper). Syracuse University and the Barclay Trading Group, Syracuse, NY.
Edwards, F. R., & Caglayan, O. (2001). Survivorship bias and investment style in the returns of CTAs. Journal of Portfolio Management, 27, 30-41.
Elton, E. J., Gruber, M. J., & Rentzler, J. C. (1987). Professionally managed publicly traded commodity funds. Journal of Business, 60, 177-199.
Elton, E. J., Gruber, M. J., & Rentzler, J. C. (1990). The performance of publicly offered commodity funds. Financial Analysts Journal, 46, 23-30.
Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3-56.
Fama, E. F., & French, K. R. (1998). Value versus growth: The international evidence. Journal of Finance, 53, 1975-1999.
Fung, W., & Hsieh, D. A. (1997). Survivorship bias and investment style in the returns of CTAs. Journal of Portfolio Management, 24, 30-41.
Fung, W., & Hsieh, D. A. (2000). Performance characteristics of hedge funds and commodity funds: Natural vs. spurious biases. Journal of Quantitative and Financial Analysis, 35, 291-307.
Fung, W., & Hsieh, D. A. (2001). The risk in hedge fund strategies: Theory and evidence from trend followers. Review of Financial Studies, 14, 313-341.
Harvey, C., & Siddique, A. (2001), Conditional skewness in asset pricing tests. Journal of Finance, 55, 1263-1295.
Hübner, G., & Papageorgiou, N. (2004), The performance of CTAs in changing market conditions. In G. N. Gregoriou, V. N. Karavas, F.-S. Lhabitant, & F. Rouah (Eds.), Commodity trading advisors: Risk performance analysis and selection. Hoboken, NJ: Wiley.
Irwin, S. (1994). Further evidence on the usefulness of CTA performance information in public commodity pool prospectuses and a proposal for reform. In D. M. Chance, & R. R. Trippi (Eds.), Advances in futures and options research, (pp. 251-265). Greenwich, CT: JAI Press.
Irwin, S., Krukemeyer, T., & Zulauf, C. R. (1992b). Are publicly commodity pools a good investment? In C. C. Peter (Ed.), Managed futures: Performance evaluation and analysis of commodity funds, pools, and accounts. Chicago, IL: Probus Publishing.
Irwin, S., Zulauf, C. R., & Ward, B. (1992a). The predictability of managed futures returns. Journal of Derivatives, 2, 20-27.
Kama, A., & Mori, A. (2008). Why institutional investors should allocate to CTAs. Swiss Hedge, First Quarter, 16-17.
Kat, H. M. (2004). Managed futures and hedge funds: A match made in heaven. In G. N. Gregoriou, V. N. Karavas, F.-S. Lhabitant, & F. Rouah (Eds.), Commodity trading advisors: Risk performance analysis and selection. Hoboken, NJ: Wiley.
Liang, B. (2003). The accuracy of hedge fund returns. Journal of Portfolio Management, 29, 111-121.
Liang, B. (2004). Alternative investments: CTAs, hedge funds, and funds-of-funds. Journal of Investment Management, 2, 1-18.
Lintner, J. V. (1983). The potential role of managed commodity-financial futures accounts in portfolios of stocks and bonds. Annual Conference of the Financial Analysts Federation, Toronto, Canada.
Martellini, L., & Vaissié, M. (2004). Benchmarking the performance of CTAs. In G. N. Gregoriou, V. N. Karavas, F.-S. Lhabitant, & F. Rouah (Eds.), Commodity trading advisors: Risk performance analysis and selection. Hoboken, NJ: Wiley.
McCarthy, D., Schneeweis, T., & Spurgin, R. (1996). Survivor bias in commodity trading performance. Journal of Futures Markets, 16, 757-772.
Schneeweis, T. (2005). The benefits of managed futures (CISDM Presentation). Amherst, MA: University of Massachusetts.
Schneeweis, T., & Gupta, B. (2006). Diversification benefits of managed futures. Journal of Investment Consulting, 8, 53-62.
Schneeweis, T., & Spurgin, R. (1997). Managed futures, hedge funds and mutual fund return estimation: A multifactor approach (CISDM Working Paper). Amherst, MA: University of Massachusetts.
Schneeweis, T., Spurgin, R., & McCarthy, D. (1997). Informational content in historical CTA performance. Journal of Futures Markets, 14, 51-78.