The Case for Investing in Non-Traded REITs
Sameer Jain

Non-traded REITs (NTRs), like their publicly traded counterparts, make investments in income-producing commercial real estate. They typically hold multiple properties in a single portfolio and are ordinarily categorized by the types of properties they own, such as retail, industrial, multifamily, office, and storage, among others. Certain of these REITs structure their underlying investments as net leases in which the tenant is responsible for bearing real estate costs directly, such as property taxes, insurance, operating expenses, and capital items, in addition to rent and utility payments. By distributing essentially 100% of all rent payments received by tenants, these REITs provide a durable stream of monthly income to their investors and also offer the potential for long-term capital appreciation through property value growth.

Oil Price Drivers and Movements: The Challenge for Future Research
Hillard Huntington, Saud M. Al-Fattah, Zhuo Huang, Michael Gucwa, and Ali Nouria

The complexity of the world oil market has increased dramatically in recent years and new approaches are needed to understand, model, and forecast oil prices today. In addition to the commencement of the financialization era in oil markets, there have been structural changes in the global oil market. Financial instruments are communicating information about future conditions much more rapidly than in the past. Prices from long and short-duration contracts have started moving more together. Abrupt changes in supply and demand, influenced by such events and trends as the financial crisis of 2008-09, uncertainty about China’s economic growth rate, the Libyan uprising, the Iranian Nuclear standstill, and the Deepwater Horizon oil spill, change expectations and current prices. Although volatility appears greater over this period, financialization makes price discovery more robust. Most empirical economic studies suggest that fundamental factors shaped the expectations over 2004-08, although financial bubbles may have emerged just prior to and during the summer of 2008.

Impact of the Recent Regulatory Changes on the UCITS CTA Market
Louis Zanolin, CAIA

UCITS CTA funds have experienced exponential growth over the last four years. The number of funds has grown from 9 to 55 funds from January 2008 to September 2012. The assets under management have surged from EUR 1.57 billion to EUR 6.09 billion over the same period. Exhibit 1 illustrates the progression of both the number of funds and assets managed by CTA managers in UCITS format. The first UCITS CTA funds were launched mainly by managers based in Europe who were advising onshore vehicles. The market really began to pick-up after the summer of 2009, with large offshore CTA managers coming into play. Since then, the assets under management for UCITS CTA funds have more than doubled.

Statistical Arbitrage and High-Frequency Data with an Application to Eurostoxx 50 Equities
Christian Dunis, Gianluigi Giorgioni, Jason Laws, Jozef Rudy

In this article, a basic pair trading (long-short) strategy is applied to the constituent shares of the Eurostoxx 50 index. A long-short strategy is applied to shares sampled at six different frequencies, namely 5-minute, 10-minute, 20-minute, 30-minute, 60-minute, and daily sampling intervals. The high frequency data spans from July 3, 2009 to November 17, 2009; our daily data spans from January 3, 2000 to November 17, 2009.

We introduce a novel approach, which helps to enhance the performance of the basic trading strategy. The approach consists of selecting the pairs for trading based on the best in-sample information ratios and the highest in-sample t-stat of the Augmented Dickey-Fuller (ADF) test, which is applied to the residuals of the co-integrating regression using daily data. We form the portfolios of five best trading pairs and compare the performance with appropriate benchmarks.

The Resiliency of the U.S. Futures Industry
Hilary Till

Financial professionals are well-aware that the ongoing implementation of the Dodd-Frank Act could cause changes to market structure, including the structure of the futures markets. Should market participants be concerned? The short answer is not necessarily, given that the history of U.S. futures trading is one of responding to constant adversity through dynamic innovation.

IR&M Momentum Monitor
Alexander Ineichen, CAIA, CFA, FRM

Spotting change is important. There are essentially two approaches to change: having a guess, or measuring it in a systematic fashion with an applicable methodology. The latter is robust, the former is not. Momentum can be perceived as a philosophy. We herein recommend it as a risk management tool, rather than a philosophy. If risk is defined as “exposure to change,” then one ought to spot the change.