The performance of commodity trading advisors’ investment strategies
Tersa, Joona (2020)
Pro gradu -tutkielma
2020
School of Business and Management, Kauppatieteet
Kaikki oikeudet pidätetään.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2020043023458
https://urn.fi/URN:NBN:fi-fe2020043023458
Tiivistelmä
The purpose of this study was to examine the performance of Commodity trading advisors’ investing strategies from January 1997 to December 2013. CTAs were divided into three groups according to their investment approach: technical CTAs, fundamental CTAs and those that combined the two strategies. The study employs several models to capture the performance of CTAs as well as to asses on which risk factors CTAs have exposure. The performance measurements included Sharpe ratio and extended Sharpe ratio to control for skewness and kurtosis. In addition, two multifactor models were applied: Fung and Hsieh 9-factor model and multi asset momentum model.
The fundamental strategy portfolio is the best performing portfolio during the full sample period when measuring with average returns, Sharpe ratio and SKASR. The significance of the differences in performance of the strategy portfolios are not statistically significant on any of the strategy pairs during the full sample period. The multifactor models implemented in the study have very limited ability to answer the question of whether the different strategies were able to create alpha. The explanatory power of the Fung and Hsieh 9-factor model is close to zero with fundamental and mixed strategies and only explains 28 % of the technical strategy’s return variation. The multi-asset momentum factor model explains an even lower amount of variation for all three strategy portfolios during the full sample period. Also, the attempt to improve explanatory power by volatility adjusting the factors was not successful.
The fundamental strategy portfolio is the best performing portfolio during the full sample period when measuring with average returns, Sharpe ratio and SKASR. The significance of the differences in performance of the strategy portfolios are not statistically significant on any of the strategy pairs during the full sample period. The multifactor models implemented in the study have very limited ability to answer the question of whether the different strategies were able to create alpha. The explanatory power of the Fung and Hsieh 9-factor model is close to zero with fundamental and mixed strategies and only explains 28 % of the technical strategy’s return variation. The multi-asset momentum factor model explains an even lower amount of variation for all three strategy portfolios during the full sample period. Also, the attempt to improve explanatory power by volatility adjusting the factors was not successful.