Nonstationarity Tests of Managed Futures

Abstract

This article examines whether the net asset values (NAVs) of managed futures follow random walks. Monthly data from January 1990 to December 2000 are tested for nonstationarity and random walk with drift, using the Augmented Dickey-Fuller test. All of the managed futures classifications are nonstationary, but on the other hand, none are found to behave as random walks. Even when random walk behavior is allowed, evidence of positive drift parameters ensures that the NAVs contain discernable trends. The authors conclude that historical NAVs can be used to create reliable predictive models of managed futures.