Trading Strategies For Tactical Portfolio Allocation

chapter*{Introduction} addcontentsline{toc}{chapter}{Introduction} Trading strategies are systematic rules to determine asset allocation. Behind their construction is the notion that contemporary information, whether asset specific or market wide, can predict expected returns. A large body of empirical evidence finds significant returns to these rule based portfolios, suggesting the predictive power of the trading signals from which they are constructed. The performance of trading strategies is an intriguing feature for both financial economists - who read the implied predictability as a challenge for models of market efficiency - and financial practitioners - who exploit strategy performance for tactical portfolio allocation. This thesis investigates various trading strategies in futures markets, aiming to assess their economic value, distinguish sources of associated risk premia and to understand the effect of their implementation on the wider futures market. Futures contracts originated in Chicago over 150 years ago as a vehicle for farmers, concerned with the price risk of their forward harvest, to transfer risk to speculators, looking to exploit price fluctuations for financial gain. From these humble beginnings futures markets have evolved into a burgeoning asset class, covering a wide variety of underlying goods from equities, bonds, commodities, and currencies. 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