PT  - JOURNAL ARTICLE
AU  - Greg N. Gregoriou
AU  - Fabrice Rouah
TI  - Random Walk Behavior of CTA Returns
AID  - 10.3905/jai.2003.319082
DP  - 2003 Jun 30
TA  - The Journal of Alternative Investments
PG  - 51--56
VI  - 6
IP  - 1
4099  - https://pm-research.com/content/6/1/51.short
4100  - https://pm-research.com/content/6/1/51.full
AB  - This article examines whether CTA percent changes in NAVs follow random walks. Monthly data from January 1994 to December 2000 are tested for nonstationarity and random walk with drift, using the Augmented Dickey-Fuller test. All classifications (except the Diversified sub-index) are found to behave as random walks, but many of the series show evidence of a positive drift parameter, an indication that trends could be present in the series. The effectiveness of CTAs in enhancing risk-return characteristics of portfolios could be compromised when pure random walk behavior is identified.