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The Journal of Alternative Investments

The Journal of Alternative Investments

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Article

CTA Performance Persistence: 1994–2010

Marat Molyboga, Seungho Baek and John F.O. Bilson
The Journal of Alternative Investments Spring 2014, 16 (4) 61-70; DOI: https://doi.org/10.3905/jai.2014.16.4.061
Marat Molyboga
is the director of research at Efficient Capital Management, LLC in Warrenville, IL. molyboga@efficientcapital.com
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Seungho Baek
is a quantitative analyst at Efficient Capital Management, LLC in Warrenville, IL. sbaek@efficientcapital.com
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John F.O. Bilson
is associate dean and a professor of finance at the Illinois Institute of Technology Stuart School of Business in Chicago, IL. bilson@stuart.iit.edu
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Abstract

This article tests the performance persistence hypothesis for Commodity Trading Advisors (CTAs), considering the impact of incubation and backfill bias. The authors apply the Fama-MacBeth approach and quintile analysis, and conclude that ranking CTAs using the t-statistic of alpha with respect to a CTA benchmark is predictive of future returns. The authors provide evidence that the identified strong persistence of the best-performing funds may be driven solely by the incubation and backfill biases. They find that the worst-performing funds have a higher probability of liquidation than those of the other quintiles, and the top-performing funds have a higher conditional probability of staying top performers versus becoming worst performers than that of the worst performing funds.

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The Journal of Alternative Investments: 16 (4)
The Journal of Alternative Investments
Vol. 16, Issue 4
Spring 2014
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CTA Performance Persistence: 1994–2010
Marat Molyboga, Seungho Baek, John F.O. Bilson
The Journal of Alternative Investments Mar 2014, 16 (4) 61-70; DOI: 10.3905/jai.2014.16.4.061

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CTA Performance Persistence: 1994–2010
Marat Molyboga, Seungho Baek, John F.O. Bilson
The Journal of Alternative Investments Mar 2014, 16 (4) 61-70; DOI: 10.3905/jai.2014.16.4.061
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