Futures Market Liquidity and the Trading Cost of Trend Following Strategies

Posted: 14 Feb 2020

See all articles by Charles Chevalier

Charles Chevalier

KeyQuant; Université Paris Dauphine - Department of Finance

Serge Darolles

Université Paris Dauphine - DRM-CEREG

Date Written: December 1, 2019

Abstract

We use a unique dataset reporting the trading of an institutional asset manager implementing trend following strategies to estimate the associated transaction costs. With information both at the trade and the fund levels, we disentangle the impact of the execution quality from the management decisions on these costs. We show that the disappointing performances observed for trend following these recent years are explained by a drop in the volatility of the futures markets these strategies generally trade.

Keywords: Trading Costs, Market Impact, Liquidity, Trend Following

JEL Classification: G10, G11, G12, G15

Suggested Citation

Chevalier, Charles and Darolles, Serge, Futures Market Liquidity and the Trading Cost of Trend Following Strategies (December 1, 2019). Université Paris-Dauphine Research Paper No. 3523005, Available at SSRN: https://ssrn.com/abstract=3523005

Charles Chevalier (Contact Author)

KeyQuant ( email )

20 rue Quentin-Bauchart
Paris, 75008
France

Université Paris Dauphine - Department of Finance ( email )

Place du Maréchal de Lattre de Tassigny
Paris Cedex 16, 75775
France

Serge Darolles

Université Paris Dauphine - DRM-CEREG ( email )

place du Maréchal de Lattre de Tassigny
cedex 16
Paris, 75775
France

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