Further Evidence on the Usefulness of Cta Performance Information in Public Commodity Pool Prospectuses and a Proposal for Reform
ADVANCES IN FUTURES AND OPTIONS RESEARCH, Vol 7, 1994
Posted: 20 Dec 1998
This study investigates the informational value of Commodity Trading Advisor (CTA) returns contained in prospectuses for multiple-CTA public commodity pools. Historical CTA returns are substantially inflated relative to actual returns, and historical CTA returns and actual pool returns are uncorrelated. Hence, historical CTA returns contain little or no information that is useful in predicting actual returns. In light of this evidence, a modified disclosure policy is suggested. The policy involves a two-part presentation of performance data in prospectuses. In the first and required part, the actual returns of an unbiased public commodity pool index over the most recent three-year period would be presented. In the second and optional part, historical CTA performance data would be presented. The reporting format and amount of CTA data presented would be at the discretion of the pool operator.
JEL Classification: G11, G13, G18
Suggested Citation: Suggested Citation