Performance and the Potential of Managed Futures in the Market Crisis Period

H.Baker and Filbeck, G., ed. Alternative Investments: Instruments, Performance, Benchmarks, and Strategies. John Wiley & Sons. pp. 437.

28 Pages Posted: 4 Mar 2012 Last revised: 26 Dec 2012

See all articles by Kai-Hong Tee

Kai-Hong Tee

Loughborough University - School of Business and Economics

Date Written: December 12, 2012

Abstract

The growth of the managed futures industry increased dramatically in the late 1970s following the introduction of the world’s first financial futures contracts (foreign currency futures) by the Chicago Mercantile Exchange in 1972. The first academic research on the performance of managed futures was published in the 1980s. Researchers who adopted similar performance metrics to assess managed futures in a different time periods also reached similar conclusions as earlier studies about the benefits of managed futures. Some recent studies also address the issues of performance persistence and market timing ability of managed futures traders. Following the onset of the financial crisis of 2007–2008, researchers also reassessed the diversification benefits of managed futures and the low correlations of their returns with those of stocks and bonds. Evidence reaffirmed that the favorable characteristics of managed futures investments were useful for investors looking for "crisis alpha" for their portfolios in periods with high market volatility.

Keywords: managed futures, Chicago Mercantile Exchange (CME), market timing, performance persistence, post-2008 crisis, diversification benefits, correlations, allocation mechanism

JEL Classification: O16, L16, D81

Suggested Citation

Tee, Kai-Hong, Performance and the Potential of Managed Futures in the Market Crisis Period (December 12, 2012). H.Baker and Filbeck, G., ed. Alternative Investments: Instruments, Performance, Benchmarks, and Strategies. John Wiley & Sons. pp. 437. , Available at SSRN: https://ssrn.com/abstract=2015618 or http://dx.doi.org/10.2139/ssrn.2015618

Kai-Hong Tee (Contact Author)

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

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