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When it pays to follow the crowd: Strategy conformity and CTA performance
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Accepted Version
Date
2021-03-13
Authors
Bollen, Nicolas P. B.
Hutchinson, Mark C.
O'Brien, John
Journal Title
Journal ISSN
Volume Title
Publisher
John Wiley & Sons, Inc.
Published Version
Abstract
Prior research in hedge fund and mutual fund management finds a positive relation between portfolio distinctiveness and subsequent performance, suggesting that strategy differentiation is associated with superior skill. We find that commodity trading advisors (CTAs) with returns that correlate more strongly with those of peers feature higher performance and are more highly exposed to a time series momentum factor. Strategy conformity appears to be a signal of managerial skill in CTAs, in contrast to hedge funds and mutual funds. These results indicate that a common trend following strategy drives CTA returns and that CTAs offer investors an opportunity to invest in momentum.
Description
Keywords
CTA , Futures contracts , Momentum
Citation
Bollen, N. P. B., Hutchinson, M. C. and O'Brien, J. (2021) 'When it pays to follow the crowd: Strategy conformity and CTA performance', Journal of Futures Markets, 41(6), pp. 875-894. doi: 10.1002/fut.22199
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Copyright
© 2021, Wiley Periodicals LLC. This is the peer reviewed version of the following item: Bollen, N. P. B., Hutchinson, M. C. and O'Brien, J. (2021) 'When it pays to follow the crowd: Strategy conformity and CTA performance', Journal of Futures Markets, 41(6), pp. 875-894, doi: 10.1002/fut.22199, which has been published in final form at https://doi.org/10.1002/fut.22199. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.