The performance of commodity trading advisors: A mean-variance-ratio test approach

Zhidong Bai; Kok Fai Phoon; Keyan Wang; Wing Keung Wong

doi:10.1016/j.najef.2012.06.010

The performance of commodity trading advisors: A mean-variance-ratio test approach

Zhidong Bai^*, Kok Fai Phoon, Keyan Wang, Wing Keung Wong

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › peer-review

18 Citations (Scopus)

Abstract

In this paper, we provide evidence that the mean-variance-ratio (MVR) test is superior to the Sharpe ratio (SR) test by applying both tests to analyze the performance of commodity trading advisors (CTAs). Our findings show that while the SR test concludes that most of the CTA funds being analyzed are indistinguishable in their performance, the MVR statistic shows that some funds outperformed others. Moreover, the SR statistic indicates that one fund significantly outperformed another even when the difference between the two funds was insignificant or even changed directions over sub-periods. Conversely, the MVR statistic can detect such changes when they occur in the sub-periods. In addition, we have conducted simulations to show that the MVR test possesses good power.

Original language	English
Pages (from-to)	188-201
Number of pages	14
Journal	North American Journal of Economics and Finance
Volume	25
DOIs	https://doi.org/10.1016/j.najef.2012.06.010
Publication status	Published - Aug 2013

Scopus Subject Areas

Finance
Economics and Econometrics

User-Defined Keywords

Fund management
Hypothesis testing
Sharpe ratio
Uniformly most powerful unbiased test

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10.1016/j.najef.2012.06.010

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title = "The performance of commodity trading advisors: A mean-variance-ratio test approach",

abstract = "In this paper, we provide evidence that the mean-variance-ratio (MVR) test is superior to the Sharpe ratio (SR) test by applying both tests to analyze the performance of commodity trading advisors (CTAs). Our findings show that while the SR test concludes that most of the CTA funds being analyzed are indistinguishable in their performance, the MVR statistic shows that some funds outperformed others. Moreover, the SR statistic indicates that one fund significantly outperformed another even when the difference between the two funds was insignificant or even changed directions over sub-periods. Conversely, the MVR statistic can detect such changes when they occur in the sub-periods. In addition, we have conducted simulations to show that the MVR test possesses good power.",

keywords = "Fund management, Hypothesis testing, Sharpe ratio, Uniformly most powerful unbiased test",

author = "Zhidong Bai and Phoon, {Kok Fai} and Keyan Wang and Wong, {Wing Keung}",

year = "2013",

month = aug,

doi = "10.1016/j.najef.2012.06.010",

language = "English",

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pages = "188--201",

journal = "North American Journal of Economics and Finance",

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T1 - The performance of commodity trading advisors

T2 - A mean-variance-ratio test approach

AU - Bai, Zhidong

AU - Phoon, Kok Fai

AU - Wang, Keyan

AU - Wong, Wing Keung

PY - 2013/8

Y1 - 2013/8

N2 - In this paper, we provide evidence that the mean-variance-ratio (MVR) test is superior to the Sharpe ratio (SR) test by applying both tests to analyze the performance of commodity trading advisors (CTAs). Our findings show that while the SR test concludes that most of the CTA funds being analyzed are indistinguishable in their performance, the MVR statistic shows that some funds outperformed others. Moreover, the SR statistic indicates that one fund significantly outperformed another even when the difference between the two funds was insignificant or even changed directions over sub-periods. Conversely, the MVR statistic can detect such changes when they occur in the sub-periods. In addition, we have conducted simulations to show that the MVR test possesses good power.

AB - In this paper, we provide evidence that the mean-variance-ratio (MVR) test is superior to the Sharpe ratio (SR) test by applying both tests to analyze the performance of commodity trading advisors (CTAs). Our findings show that while the SR test concludes that most of the CTA funds being analyzed are indistinguishable in their performance, the MVR statistic shows that some funds outperformed others. Moreover, the SR statistic indicates that one fund significantly outperformed another even when the difference between the two funds was insignificant or even changed directions over sub-periods. Conversely, the MVR statistic can detect such changes when they occur in the sub-periods. In addition, we have conducted simulations to show that the MVR test possesses good power.

KW - Fund management

KW - Hypothesis testing

KW - Sharpe ratio

KW - Uniformly most powerful unbiased test

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U2 - 10.1016/j.najef.2012.06.010

DO - 10.1016/j.najef.2012.06.010

M3 - Journal article

AN - SCOPUS:84879089360

SN - 1062-9408

VL - 25

SP - 188

EP - 201

JO - North American Journal of Economics and Finance

JF - North American Journal of Economics and Finance

ER -

The performance of commodity trading advisors: A mean-variance-ratio test approach

Abstract

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