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Latest Research

1 August 2016

Investors often perceive trend-following as a way to mitigate the impact of market downturns on their portfolios as the strategy can profit from strong, downward price trends. But this is not always the case as recent selloffs have shown. ....

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1 April 2016

Fixed income trend following strategies have benefited over the past 35 years from the combination of a general downwards drift in interest rates and a positive roll yield. ....

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4 January 2016

Does globalisation mean that the performance of a company is related to that of its sector more than its country? We measure the contributions of sector and country factors to the returns of the constituents of the MSCI World index. ....

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1 November 2015

October has been the most volatile month for stocks on average over the last 87 years. Is this result purely due to chance, or should we take it seriously and expect it to continue into the future? ....

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1 October 2015

Institutional investors with an allocation to hedge fund strategies rarely allocate to a single hedge fund. Typically, the hedge fund exposure is made up of allocations to several individual managers. ....

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13 August 2015

The most reliable way to test trading strategies is out-of-sample, on data that was not available when the strategy was conceived and implemented. ....

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1 August 2015

Randomly selected equally weighted portfolios have outperformed market-capitalisation weighted portfolios globally and by region over the last fifteen years. These results and structural features of market-capitalisation benchmarks call the supposed efficiency of these benchmarks into question. ....

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1 June 2015

In the five years prior to 2014 managed futures trend‐following strategies experienced a long run of weak performance, leading to speculation that the strategy might be ‘dead’. ....

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1 January 2015

Value, size and momentum have a long history as stock price predictors, and similar indicators have been applied to stock indices in order to predict the performance of one national index against another. ....

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1 November 2014

The last few years have seen a very marked drop in stock market volatility from the elevated levels seen during and in the aftermath of the 2007 financial crisis. Given the scale of the drop it is instructive to put recent experience into a longer historical context. ....

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1 October 2014

Through the power of diversification it is possible to combine strategies into one portfolio in such a way that is has better risk-adjusted performance than its individual components. ....

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1 October 2014

CTAs are often perceived to provide a useful tail hedge in a portfolio of equities and bonds due to their historically low long term correlation to both of these asset classes. ....

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1 August 2014

Much has been made about the poor performance of quantitative strategies in equities over the past 5 years, or so. With a corresponding increase in assets allocated to such strategies, it would seem that over-crowding has led to profit margins being squeezed as markets become more efficient. ....

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20 June 2014

Tracking error is used within the finance industry to determine how well one instrument tracks another. Often the tracking error is incorrectly defined as the standard deviation of active returns rather than the square root of the average squared active return. ....

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11 June 2014

Today’s abundance of both data and computing power means one is able to quickly conduct back tests of strategies on many markets over long periods of time. However, without appropriate understanding of the data it can be too easy to discover fool’s gold. ....

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12 April 2014

We briefly discuss some common points of confusion regarding 'roll yield'; the return that a futures investor captures when their futures contract converges to the spot price. ....

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13 February 2014

Recently, there has been a rise in the number of low-cost "CTA tracker" funds which aim to provide investors with an exposure to the 'beta' of the CTA industry. ....

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8 February 2014

Uncertainty is inevitable during portfolio optimisation, and ignoring it can lead to a large gulf between the realised and expected performance of a strategy. ....

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3 February 2014

Commodity Trading Advisor (CTA) is a US regulatory category for investment managers operating in the futures markets. Owing to their dominance the CTA rubric has become synonymous with investment managers that operate a 'trend following' strategy. ....

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1 February 2014

Buying an index tracker is seen as a cheap and easy way to get exposure to stock markets. The last decade has seen a growth in the amount of money passively tracking market capitalisation weighted indexes. ....

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24 January 2014

The long-term historical correlation of CTAs with stock markets is effectively zero. But there exist many misconceptions regarding what this means. ....

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3 January 2014

We document the correlation structure of financial markets over the last 50 years. In this context, the recent crisis stands out as a prolonged period of heightened activity across asset classes. ....

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2 December 2013

Overfitting is a well known problem and one would expect clever statisticians and scientists not to succomb to its temptations. But what amounts to overfitting can occur more subtly through the collective behaviour of many individuals within an organization or across many organizations. ....

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1 December 2013

When launching a new systematic fund it is common practice to use hypothetical performance data as part of the marketing literature. In this paper we find evidence that such data is significantly over-optimistic compared to the subsequent realised performance of a fund. ....

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1 January 2004

Past Performance is not an Indication of Future Results’: like most boilerplate text, this warning is often consigned to the margins of investors' consciousness, its ability to pack a punch eroded by constant repetition. ....

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1 June 1994

This paper is a discussion of the scientific significance and nature of mathematical models generally, and in finance theory in particular; of the relation of such models to a postulated 'reality'; of the sufficiency of the empirical grounding of such models to the task of drawing useful inferences about such a reality; and of the danger of unwittingly propagating erroneous con ....

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