Publication Type

Working Paper

Publication Date

1-2013

Abstract

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. First, we construct a very comprehensive set of time-series momentum benchmark portfolios. Second, we provide evidence that CTAs follow time-series 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.

Keywords

Hedge funds, commodity trading advisors, momentum stategies

Discipline

Finance and Financial Management

First Page

1-60

Comments

The research was partially funded by BNPP Hedge Fund Centre at Singapore Management Centre. Copy made available with permission of the authors.

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