Price Shocks and the Performance of Managed Futures Funds

Abstract

Can specialized trading firms capture the potentially substantial returns associated with large sudden price moves? This study attempts to answer that question by examining the monthly performance of managed futures funds during months in which large daily price shocks in the foreign exchange market occur. Specifically, it attempts to assess whether Commodity Trading Advisors (CTAs) that specialize in speculating on changes in foreign exchange rates are able to capture the price change precipitated by the shock in the month of the price shock