Factors Affecting the Birth and Fund Flows of CTAS

28 Pages Posted: 3 Oct 2011

See all articles by Viet Minh Do

Viet Minh Do

Monash University - Department of Accounting; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Paul Lajbcygier

Monash University - Department of Banking & Finance

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2011

Abstract

This paper investigates the birth of commodity trading advisors (CTAs) and their flow–performance relation. Specifically, we address three questions. First, we investigate the impact of existing CTAs’ performance on the number of new CTAs entering the market. Second, we investigate the importance of performance and other fund-specific factors to fund flows throughout the entire lives of CTAs. Third, we examine the smart money effect on CTAs. That is, we ask whether investors are successful in selecting subsequent well performing CTAs. Our results show that CTA managers tend to start up funds after a period of poor performance across the CTA industry. The flow–performance relation is strongly supported, with top-performing CTAs rewarded with high inflows. However, we find no evidence of ‘smart money’ effect, indicating that investors are generally unsuccessful in choosing subsequent well performing CTAs.

Keywords: Commodity trading advisors, fund flows, flow–performance relation, smart money effect

JEL Classification: G12, G20, G29

Suggested Citation

Do, Viet Minh and Faff, Robert W. and Lajbcygier, Paul and Veeraraghavan, Madhu, Factors Affecting the Birth and Fund Flows of CTAS (May 12, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1925951 or http://dx.doi.org/10.2139/ssrn.1925951

Viet Minh Do (Contact Author)

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Paul Lajbcygier

Monash University - Department of Banking & Finance ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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