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Futures market liquidity and the trading cost of trend following strategies

Author

Listed:
  • Serge Darolles

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Charles Chevalier

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

We use a unique dataset reporting the trading of an institutional asset manager implementingtrend following strategies to estimate the associated transaction costs. With information both atthe trade and the fund levels, we disentangle the sources of these costs by differentiating individualexecution quality from managerial decisions. We show that the disappointing performances observed for trend following these recent years are explained by a drop in the volatility of the futuresmarkets these strategies generally trade due to an higher proportion of fixed costs

Suggested Citation

  • Serge Darolles & Charles Chevalier, 2022. "Futures market liquidity and the trading cost of trend following strategies," Post-Print hal-04581741, HAL.
    • Handle: RePEc:hal:journl:hal-04581741
    as

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