RT Journal Article
SR Electronic
T1 Random Walk Behavior of CTA Returns
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 51
OP 56
DO 10.3905/jai.2003.319082
VO 6
IS 1
A1 Greg N. Gregoriou
A1 Fabrice Rouah
YR 2003
UL https://pm-research.com/content/6/1/51.abstract
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.