IndexMLM index, see Mount Lucas Management IndexMMA (managed money accounts), 155Modern portfolio theory, xxvModified Sharpe ratio, 279, 377–384Modified value at risk, 22–23,360–361, 379. See also Meanmodified value at risk frameworkMoment-based efficiency measure,295–297MOM (manager of managers), 7Monte Carlo simulation, 35–37, 195,196Mount Lucas Management Index(MLMI), 7, 8n1, 8n2, 84,185,187, 188, 190, 191, 195, 198,229–230MSCI EAFE Index, 362, 364MSCI Global, 340–355Multifactor model, 111, 114–115Multi-moment model, 116–118Mutual funds, managed futures vs.,239NASD, see National Association ofSecurities DealersNasdaq, 368National Association of Securities Dealers (NASD), 259–260National Futures Association (NFA),240, 387Natural gas market, 155–160,163–165, 169–181
INDEX
Net asset values (NAVs), 326–328NFA, see National Futures AssociationNoise factor, 152Non-U.S. markets, performancepersistence and, 40–44Omega ratio, 23–24Open interest, 156–157, 238Options, 40–44Performance (of CTAs):Barclay Trading Group data study,51–77comparative overview of indices,21–24contingent claim approach to,294–306CTA Global Index as methodologyfor analyzing, 58–74DEA evaluation of, see Data envelopment analysisdebate on measuring/evaluating, 130and dissolution frequency, 74–77Edhec CTA Global Index for benchmarking, 19, 21–29effect of compensation on, 248–258key drivers of, 26–29low predictability of, 47measures of, 79–80persistence of, see Performancepersistenceprevious studies on, 49–50risk measures and evaluation of,82–87and survivorship bias, 56–58from 1990 to 2003, see Market conditions (1990-2003)Performance persistence, 31–48Barclay Trading Group data study,51–77and characteristics of CTAs, 40–44of CTA Global Index, 67–74global results for, 67–69and historical performance, 37–40importance of using large amount ofdata for analyzing, 47and investing after recent losses, 45–47LaPorte Asset Allocation data on,32–33
Index
literature review for, 49–50Monte Carlo simulation of, 35–37and regressions of returns againstlagged returns, 44–45regression test for, 33–35strategies analysis of, 71–74subperiod analysis of, 69–71Portfolios:benefits of CTAs in, xxvCTAs and optimization of, 315–324downside risk in, 222–224futures trading program in, 289–292managed futures and performance of,237mimicking, 192–195replicating, 297–299single investor vs. group, 241–242three-dimensional assessment of, seeThree-dimensional frameworktime diversification of, 385–398Portfolio construction step (tradingprogram), 282–284Positive feedback trading tests, 168,172–179Price volatility, 153, 161–164Private commodity pools, 241, 242Profitability tests, 175, 180–181Public commodity funds, 241, 242Random walk behavior, 50, 326–335Regulatory issues, 240–241Replicating portfolios, 297–299Returns:with alternative investments, 11–13on hedge fund indices, 18–19and portfolio mix, 83random walk behavior of, 326–335risk-adjusted, 377–384from 1990 to 2003, see Market conditions (1990-2003)Returns-enhancing diversifiers, 338Returns-protection diversifiers, 338Risk:for comparative indices, 22–23CTA characteristics and level of,43–44downside, 221–224interdependence of measures for,203–219
423
mean-modified value at risk framework, 358–366performance evaluation and measures of, 82–87time diversification as hedge against,385–398time-varying, 84–85Risk-adjusted returns, 377–384Risk factor exposures:biases and measurement of, 26with Edhec CTA Global Index,26–29and heterogeneity of indices, 19–21Risk management:with commodity futures, 229–231diversification for, 244downside, 220–232with hedge funds, 224–226leverage for, 245long volatility strategies for, 198–201with managed futures, 226–229managed futures for, 14stop losses for, 244–245Risk management step (tradingprogram), 284–287Rolling windows, 311, 313–315Russell 3000 Index, 111–113, 117,119Russian debt crisis, 107, 108, 126, 127Salomon Brothers Government Bondindex, 7SCM Bond Index, 362, 364Securities and Exchange Commission(SEC), 260Semivariance, 85–86September 11 terrorist attacks, 107,108, 126, 127SFE, see Sydney Futures ExchangeSharpe ratio, 21, 54n3, 82, 85–86,341, 377. See also ModifiedSharpe ratioShort-term CTAs, 80n1, 245Simple efficiency model (DEA), 131,133–135, 138–145Skill-based investing, 221Sortino ratio, 21, 22, 85–86, 341Soybeans market, 155–160, 163–165,169–181
424
Space diversification, 388Speculators, 241Standard & Poor’s (S&P) 500 GrowthIndex, 24–26Standard & Poor’s (S&P) 500 Index, 7,19, 21–29, 155–160, 163–165,169–181, 340–355, 362, 364, 368Standard & Poor’s (S&P) 500 SmallCap Index, 24–26Standard & Poor’s (S&P) TSX Index,362, 364Standard & Poor’s (S&P) 500 ValueIndex, 24–26Stark 300 index, 8–9Stock portfolios, interdependence ofrisk measures for, 212, 217–219Stocks, 7Stop losses, 244–245Strategies, CTA, 88, 90. See also Longvolatility strategiesbenchmarks for, 83correlation among, 54–56by decile classification, 71–74descriptive statistics on, 53–54grouping of, 52–62number of CTAs using, 91subperiod performance of, 61–65trend following in, 183Strategies for diversification, 336–357analysis of findings, 349, 352–357and CTAs/hedge funds/fund of fundscomparison, 339–340findings and observations, 341–351literature review of, 337–338methodology for, 340sources of data for, 340Styles, CTA, 80, 88, 90, 101, 242–244Survivorship bias, 19, 56–58Sydney Futures Exchange (SFE), 261,262, 270–271Systematic CTAs, 80, 243–244, 387
INDEX
TASS Management, 51Technical analysis, 242Terrorist crisis, 107, 108, 126, 12733/66 investors, 9–10, 12–13, 15, 16Three-dimensional framework,307–325and CSFB/Tremont vs. BarclayGroup indices, 308–309and portfolio optimization withCTAs, 315–324quantitative description of CTAs,308–312rolling windows technique in, 311,313–315Time diversification, 385–398. See alsoThree-dimensional frameworkTime in existence, performance persistence and, 40–44Time-varying risk, 84–85Timing of trades, 245–247Tobit regressions, 98, 103Trade construction step (trading program), 281–282Trade discovery step (trading program),277–281Treasury bonds market, 155–160,163–165, 169–181Tremont TASS, 7Trend-following CTAs, 7, 80, 183–184,244, 287–288Treynor ratio, 82Value at Risk (VaR), 358mean-modified value at risk framework, 358–366measuring, 378–379for mimicking portfolios, 195modified, 379Variance ratios, 166–171Volatility, see Long volatility strategies;Market volatility
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