Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors

Abstract

, and seminar participants at UMass Amherst. The views expressed are those of the authors and do not necessarily reflect the official position of AIG Financial Products Corp or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Effects of speculation and interest rates in a “carry trade” model of commodity prices

“…It focuses on speculative factors, here defined as the trade-off between interest rates on 3 I am indebted to Larry Summers for this point. 4 For example, World Economic Outlook, International Monetary Fund, October 2007, April 2008and October 2008. Also OECD and World Bank.…”

Just a One-Trick Pony?An Analysis of CTA Risk and Return

“…In doing so, we add to the literature on the performance of CTAs, which is generally positive (e.g., Schneeweis, Savanayana, and McCarthy [1991]; Schneeweis, Spurgin, and McCarthy [1997]; Edwards [1998]; Liang [2004]; Gregoriou et al [2005]; Kazemi and Li [2009]; Gregoriou, Hübner, and Kooli [2010]; Arnold [2012];and Schneeweis, Spurgin, and Szado [2012]), with the exception of two early studies (Elton, Gruber, andRentzler [1987, 1990]) and a recent article (Bhardwaj, Gorton, and Rouwenhorst [2014]). A related literature also highlights the diversification benefits of CTAs as part of a broader institutional portfolio (e.g., Fung andHsieh [2000, 2001], Edwards and Caglayan [2001], and Mulvey [2012]), emphasizing the strong performance in equity and bond bear markets.…”

“…Recent academic attention has focused on how to address this bias without introducing further bias to the study. For example, Bhardwaj, Gorton, and Rouwenhorst [2014] and Getmansky, Lee, and Lo [2015] removed any observations prior to the "date added" field in the TASS database. However, subsequent evidence by Jorion and Schwarz [2014] indicated that this approach is likely to overstate backfill bias because many funds in TASS in fact report to Hedge Fund Research (HFR) at an earlier date.…”

“…The carry alternative risk premium is constructed following Koijen et al [2013] and is similar to other methods found in the literature, such as those used by Bhardwaj, Gorton, and Rouwenhorst [2014] and Gorton, Hayashi, and Rouwenhorst [2013]. Koijen et al [2013] found that carry predicts returns both in the cross section and time series for a variety of different asset classes, including global equities, bonds, currencies, and commodities.…”

An Overview of Managed Futures' Performance: 1983 to Post‐2008 Credit Crisis

“…Should the investment drop in value, then the managers must bring it back above the previous highest value before they become eligible for performance fees again. Bhardwaj et al (2008) CTAs for perceived diversification benefits and mandates for alternative investments (e.g., pension funds) and end up staying invested despite facing poor performance.…”