Evaluating a Trend-Following Commodity Index for Multi-Period Asset Allocation

The Mt. Lucas index provides a systematic approach for capturing a portion of the return of trend-following commodity traders.

Author(s):

John M. Mulvey

Department of Operations Research and Financial EngineeringBendheim Center for Finance, Princeton University

Shiv Siddhant N. Kaul

Department of Operations Research and Financial EngineeringBendheim Center for Finance, Princeton University

Koray D. Simsek

Assistant Professor of Finance, EDHEC Business SchoolResearch Associate, EDHEC Risk and Asset Management Research Centre

We analyze the Mt. Lucas Index across different historical periods, evaluating its performance within a multi-period asset allocation framework. Our results indicate that the index improves the overall return/risk characteristics of the multi-period asset allocation model. We show that the total return consists of: 1) T-Bill returns on marginable assets, 2) static returns from trend-following futures markets, and 3) rebalancing gains. The importance of the third element is emphasized.

Type: Working paper
Date: le 17/09/2003
Research Cluster : Finance

See Also

AGORA MEETS BERTRAND BADIE, POLITICAL SCIENTIST AND INTERNATIONAL RELATIONS SPECIALIST
News
- 21-10-2021
Agora students held another 'Rencontre de l'Agora' event on Wednesday 19 October, this...
Eiffel Excellence Scholarship: the most prestigious French scholarship you can get
News
- 21-10-2021
Mikhail Miroshnichenko joined EDHEC MiM Finance after his Bachelor’s degree in...
EDHEC-Auchan Learning Partnership: Retail industry transformations at the heart of EDHEC International BBA learning
News
- 20-10-2021
Auchan is joining forces with EDHEC to share its retail industry expertise with EDHEC...
The FIR-PRI Awards “Finance & Sustainability” prize for “best pedagogical innovation”: preparing future generations to fight climate change.
News
- 18-10-2021
At EDHEC, we want to take part in the fight against climate change. Through our...