Next Article in Journal
Cross-Border Venture Capital Investments: What Is the Role of Public Policy?
Previous Article in Journal
Sectoral Analysis of Factors Influencing Dividend Policy: Case of an Emerging Financial Market
Article Menu

Export Article

Open AccessArticle

Analysis of a Global Futures Trend-Following Strategy

1
School of Professional Studies, University of New York, 119 W 31st Street, New York, NY 10001, USA
2
Department of Health Administration, Texas State University, 601 University Drive, San Marcos, TX 78666, USA
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(3), 111; https://doi.org/10.3390/jrfm12030111
Received: 9 June 2019 / Revised: 22 June 2019 / Accepted: 25 June 2019 / Published: 29 June 2019
(This article belongs to the Section Financial Markets)
  |  
PDF [4015 KB, uploaded 29 June 2019]
  |  

Abstract

Systematic traders employ algorithmic strategies to manage their investments. As a result of the deterministic nature of such strategies, it is possible to determine their exact responses to any conceivable set of market conditions. Consequently, sensitivity analysis can be conducted to systematically uncover undesirable strategy behavior and enhance strategy robustness by adding controls to reduce exposure during periods of poor performance/unfavorable market conditions, or to increase exposure during periods of strong performance/favorable market conditions. In this study, we formulate both a simple systematic trend-following strategy (i.e., trading model) to simulate investment decisions and a market model to simulate the evolution of instrument prices. We then map the relationship between market model parameters under various conditions and strategy performance. We focus, in particular, on identifying the performance impact of changes in both serial dependence in price variability and changes in the trend. The long-range serial dependence of the true range worsens performance of the simple classic trend-following strategy. During periods of strong performance, the dispersion of trading outcomes increases significantly as long-range serial dependence increases. View Full-Text
Keywords: trend-following; Monte Carlo; sensitivity analysis trend-following; Monte Carlo; sensitivity analysis
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
SciFeed

Share & Cite This Article

MDPI and ACS Style

Nokes, D.; Fulton, L. Analysis of a Global Futures Trend-Following Strategy. J. Risk Financial Manag. 2019, 12, 111.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
J. Risk Financial Manag. EISSN 1911-8074 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top