The idea for this book came about when we realized that a collection of
Tmanaged futures articles dealing with quantitative and qualitative analy-
ses of commodity trading advisors (CTAs) could be a useful and welcomed
addition to existing books on the subject. The chapters that follow intro-
duce readers to many of the issues related to managed futures that we
believe are vital for proper selection and monitoring of CTAs. These issues
include performance assessment, benchmarking,...
CHAPTER 3 Performance of Managed Futures: Persistence and the Source of Returns. Managed futures investments are shown to exhibit a small amount of performance persistence. Thus, there do appear to be some differences in the skills of commodity trading advisors.
Chapter 8 uses a unique data set from the Commodity Futures Trading Commission to investigate the impact of trading by large hedge funds and commodity trading advisors (CTAs) in 13 futures markets. Regression results show there is a small but positive relationship between the trading volume of large hedge funds and CTAs and market volatility.
CHAPTER 9 Measuring the Long Volatility Strategies of Managed Futures. Certain hedge fund strategies create investment positions that resemble a long put option. Specifically, managed futures or commodity trading advisors have significant exposure to volatility events.
CHAPTER 19 CTA Strategies for Returns Enhancing Diversification. In this chapter, we analyze the risk and performance characteristics of different strategies involving the trading of commodity futures, financial futures, and options on futures employed by CTAs.
Chapter 12 focuses on managed futures. As one of many different trading strategies in the alternative investment universe, managed futures investing involves speculative investments in gold, oil, and other commodities that change in value in accordance with price fluctuations.
Chapter 15 discusses the issues involved in setting up a commodity futures trading program from start to finish. The chapter covers these areas that a new entrant into the futures markets must consider: trade discovery, trade construction, portfolio construction, risk management, leverage-level determination,
CHAPTER 14 Managed Futures Funds and Other Fiduciary Products: The Australian Regulatory Model. This chapter investigates the Australian regulatory model for managed futures funds and other fiduciary investment products whose returns are derived from the trading of futures products.
Thus, the return gap captures the funds’ unobserved actions, which include
hidden beneﬁts and hidden costs.An important hidden beneﬁt results from
a fund’s interim trades, as discussed in Ferson and Khang (2002). Even
though we can observe fund holdings only at speciﬁc points in time, funds
may trade actively between these disclosure dates. If these interim trades
create value, then the fund return RF will increase, while the return of
the disclosed holdings RH will remain unaffected.
This book was written after FASB released its proposed FAS 123 revision
Tin March 2004. As one of the valuation consultants and FASB advisors
on the FAS 123 initiative in 2003 and 2004, I would like to illustrate to
the ﬁnance and accounting world that what FASB has proposed is actually
pragmatic and applicable. I am neither for nor against the expensing of
employee stock options and would recuse myself from the philosophical
and sometimes emotional debate on whether employee ...
CHAPTER 1 Managed Futures and Hedge Funds:
A Match Made in Heaven. In this chapter we study the possible role of managed futures in portfolios
of stocks, bonds, and hedge funds. We find that allocating to managed futures allows investors to achieve a very substantial degree of overall risk
reduction at, in terms of expected return, relatively limited costs.
CHAPTER 2 Benchmarking the Performance of CTAs. The bursting of the Internet bubble in March 2000 plunged traditional market indices (stocks, bonds, etc.) into deep turmoil, leaving most institutional investors with the impression that portfolio diversification tends to fail at the exact moment that investors have a need for it
CHAPTER 4 CTA Performance, Survivorship Bias, and Dissolution Frequencies. Using a database containing 1,892 funds (including 1,350 dissolved funds), we investigate CTA performance and performance persistence to determine if some CTAs consistently and significantly outperform their peers over various time periods.
CHAPTER 5 CTA Performance Evaluation with Data Envelopment Analysis. We apply data envelopment analysis to a performance evaluation framework for CTAs. The technique allows us to integrate several performance measures into one efficiency score by establishing a multidimensional efficient frontier.
We live in an age that is dominated by the “I know what I want and I want it now” attitude. It is a time of fast food and quick fixes. A time of self before everything and Me! Me! Me! A rat race of the lowest kind. Keeping up has never seemed more important-a mentality of getting rich quick at any cost. This attitude is also why many people are getting involved with the commodity and futures industry.
CHAPTER 6 The Performance of CTAs in Changing Market Conditions. This chapter studies the performance of 6 CTA indices during the period 1990 to 2003. Four distinct phases of financial markets are isolated, as well as three extreme events.
CHAPTER 7 Simple and Cross-Efficiency of CTAs Using Data Envelopment Analysis. We apply data envelopment analysis and use the basic and crossefficiency models to evaluate the performance of CTA classifications. With the ever-increasing number of CTAs, there is an urgency to provide money managers
CHAPTER 17 CTAs and Portfolio Diversification: A Study through Time. The standard mean/variance framework and the concept of efficient frontiers are one way of assessing the portfolio added value of a hedge fund strategy such as CTAs. However, even if it provides interesting results
CHAPTER 20 Incorporating CTAs into the Asset Allocation Process: A Mean-Modified Value at Risk Framework. Value at risk has become a heavily used risk management tool, and an important approach for setting capital requirements for banks. In this study, we examine the effect of including a CTA in a traditional portfolio.
CHAPTER 23 Time Diversification: The Case of Managed Futures. There is a long-standing debate in the financial literature as to whether stocks are more risky over the long term than over the short term. In this chapter, we use an approach based on historical data and analyze the ex-post performance of managed futures over different time periods.