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 journalJournal articlepeer-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 languageEnglish
    Pages (from-to)188-201
    Number of pages14
    JournalNorth American Journal of Economics and Finance
    Volume25
    DOIs
    Publication statusPublished - 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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