Market timing of CTAs: An examination of systematic CTAs vs. discretionary CTAs

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Abstract

This study uses a set of return-based factors to explore market (return and volatility) timing ability of commodity trading advisors (CTAs). Unlike previous research, we use return-based factors that are related to the futures markets in which most CTAs trade. This leads to higher explanatory power for our multifactor model. Our approach allows us to test for the presence of market timing in multiple markets. Accordingly, we are able to identify the markets in which CTAs may have market timing ability. We find that systematic CTAs are generally more skilled at market timing than discretionary CTAs, with the latter having slightly better overall risk-adjusted performance during our study period: January 1994 to December 2004. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:1067–1099, 2009

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