Futures market liquidity and the trading cost of trend following strategies
Résumé
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