Momentum Strategies in Futures Markets and Trend-Following Funds

Akindynos-Nikolaos Balta, Robert Kosowski: In this paper, we rigorously establish a relationship between time-series momentum strategies in futures markets and commodity trading advisors (CTAs) and examine the question of capacity constraints in trend-following investing.

Author(s):

Akindynos-Nikolaos Balta

Imperial College Business School

Robert Kosowski

EDHEC Business School

First, we construct a very comprehensive set of time series momentum benchmark portfolios. Second, we provide evidence that CTAs follow timeseries momentum strategies, by showing that such benchmark strategies have high explanatory power in the time-series of CTA index returns. Third, we do not find evidence of statistically significant capacity constraints based on two different methodologies and several robustness tests. Our results have important implications for hedge fund studies and investors.

Type: Working paper
Date: le 07/01/2013
Research Cluster : Finance

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