Loading ...Month-End Adjustments by Commodity Trading Advisors
Overview of Adjustments
Commodity Trading Advisors (CTAs) often make adjustments at the end of the month. These adjustments can be influenced by various factors, including fund inflows and outflows, which tend to peak around this time.
MOM-TOM Effect
CTAs experience a phenomenon known as the MOM-TOM effect, where trading activity and price movements are significantly impacted during the turn of the month. Research indicates that a large portion of cumulative returns for CTAs occurs during the last few trading days of the month. This is attributed to net inflows or outflows that require CTAs to adjust their positions.
Types of Adjustments
- Position Rebalancing: CTAs may rebalance their portfolios to align with new market conditions or investor demands.
- Risk Management: Adjustments are made to manage risk, especially if there are significant market movements or volatility.
- Liquidity Considerations: CTAs may also adjust their positions based on liquidity needs, particularly if they anticipate large withdrawals or deposits.