 The crisis alpha of managed futures: Myth or reality?Raheel Asif, Michael Frömmel and Alexander Mende International Review of Financial Analysis, 2022, vol. 80, issue C Abstract: We examine whether commodity trading advisors (CTAs), or managed futures, provide investors with diversification benefits in times of crises, along with looking into the source of such a “crisis alpha”. We developed a systematic crisis identification methodology that takes into account both, the magnitude and the speed of price deterioration and apply it to a unique dataset, that includes realized returns and sector positions of CTAs on a daily basis. We find CTAs do acquire positive gains in most sectors during crises, which originate from two sources: Firstly, their diversification across multiple futures markets, i.e. positive yields in gaining markets can counterbalance low performance in the crisis market. Secondly, the fast reduction in CTAs' exposure to crisis markets (in less than 15 days for composite indices) allows them to stabilize their performance. Both factors together, quickly cutting losses in crisis sectors while staying profitable in the other ones, allow CTAs to generate crisis alpha. Keywords: Market timing; Commodity trading advisors; Crisis alpha (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:80:y:2022:i:c:s1057521922000242 DOI: 10.1016/j.irfa.2022.102045 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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