TY - UNPB
T1 - Performance, Persistence, and Pay
T2 - A New Perspective on CTAs
AU - Krohn, Ingomar
AU - Mende, Alexander
AU - Moore, Michael J.
AU - Raman, Vikas
PY - 2020/5/14
Y1 - 2020/5/14
N2 - Using a large and representative dataset of commodity trading advisors (CTAs), we provide compelling evidence that CTAs generate significant net excess returns of at least 4.1% annually; that approximately 64% of the funds have positively skewed returns; and that there is considerable heterogeneity amongst CTAs, with systematic trend followers doing significantly better than other subcategories. More importantly, we find that CTAs not only beat passive, normative benchmarks, with a yearly gross alpha of at least 5.3% but also generate significant, incremental crisis alpha during periods of equity market turmoil. Finally, we show that cross-sectional differences in the performance of CTAs are persistent up to 3 years and that managerial compensation predicts fund performance. Our results are consistent with a rational market where investors compete to invest with successful CTA managers, who use fees to signal their skills to investors.
AB - Using a large and representative dataset of commodity trading advisors (CTAs), we provide compelling evidence that CTAs generate significant net excess returns of at least 4.1% annually; that approximately 64% of the funds have positively skewed returns; and that there is considerable heterogeneity amongst CTAs, with systematic trend followers doing significantly better than other subcategories. More importantly, we find that CTAs not only beat passive, normative benchmarks, with a yearly gross alpha of at least 5.3% but also generate significant, incremental crisis alpha during periods of equity market turmoil. Finally, we show that cross-sectional differences in the performance of CTAs are persistent up to 3 years and that managerial compensation predicts fund performance. Our results are consistent with a rational market where investors compete to invest with successful CTA managers, who use fees to signal their skills to investors.
KW - Commodity trading advisors
KW - Alternative investments
KW - Information and market efficiency
KW - Managerial skill
KW - Performance
KW - Commodity trading advisors
KW - Alternative investments
KW - Information and market efficiency
KW - Managerial skill
KW - Performance
U2 - 10.2139/ssrn.2972358
DO - 10.2139/ssrn.2972358
M3 - Working paper
T3 - WBS Finance Group Research Paper
BT - Performance, Persistence, and Pay
PB - Warwick Finance Group. Warwick Business School. University of Warwick
CY - Warwick
ER -