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

Fletcher, Jonathan and Basu, Devraj (2016) An examination of the benefits of dynamic trading strategies in U.K. closed-end funds. International Review of Financial Analysis, 47. pp. 109-118. ISSN 1057-5219 (https://doi.org/10.1016/j.irfa.2016.04.012)

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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.

ORCID iDs

Fletcher, Jonathan ORCID logoORCID: https://orcid.org/0000-0003-0568-9145 and Basu, Devraj ORCID logoORCID: https://orcid.org/0000-0003-0452-1033;
CORE (COnnecting REpositories)