An examination of the benefits of dynamic trading strategies in U.K. closed-end funds

Research output: Contribution to journalArticle

Abstract

We examine the after-cost out-of-sample performance of the unconditional mean-variance (UMV) strategy in the presence of conditioning information (Ferson and Siegel(2001)) using portfolios of U.K. equity closed-end funds. We find that the performance of the UMV strategy significantly improves when using lagged information variables with the highest persistence (first-order autocorrelation) levels and reduces turnover. This strategy is able to outperform alternative dynamic trading strategies and performs well across different subperiods. At low levels of trading costs, the UMV strategy is able to deliver significant value added to investors.
LanguageEnglish
Pages109-118
Number of pages10
JournalInternational Review of Financial Analysis
Volume47
Early online date2 May 2016
DOIs
Publication statusPublished - 31 Oct 2016

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Closed-end funds
Trading strategies
Mean-variance
Persistence
Conditioning
Autocorrelation
Equity
Turnover
Value added
Investors
Costs
Trading costs

Keywords

  • mean-variance analysis
  • dynamic trading strategies
  • closed-end funds

Cite this

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title = "An examination of the benefits of dynamic trading strategies in U.K. closed-end funds",
abstract = "We examine the after-cost out-of-sample performance of the unconditional mean-variance (UMV) strategy in the presence of conditioning information (Ferson and Siegel(2001)) using portfolios of U.K. equity closed-end funds. We find that the performance of the UMV strategy significantly improves when using lagged information variables with the highest persistence (first-order autocorrelation) levels and reduces turnover. This strategy is able to outperform alternative dynamic trading strategies and performs well across different subperiods. At low levels of trading costs, the UMV strategy is able to deliver significant value added to investors.",
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AB - We examine the after-cost out-of-sample performance of the unconditional mean-variance (UMV) strategy in the presence of conditioning information (Ferson and Siegel(2001)) using portfolios of U.K. equity closed-end funds. We find that the performance of the UMV strategy significantly improves when using lagged information variables with the highest persistence (first-order autocorrelation) levels and reduces turnover. This strategy is able to outperform alternative dynamic trading strategies and performs well across different subperiods. At low levels of trading costs, the UMV strategy is able to deliver significant value added to investors.

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