Maximizing futures returns using fixed fraction asset allocation

John A. Anderson, Robert W. Faff*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)


While considerable evidence has been produced concerning the efficacy of trading rules in futures markets, the results have generally not allowed for the reinvestment of profits as might be observed for real traders. Similarly, the determination of the appropriate capital allocation required per futures contract traded has been largely unstructured so making reported percentage returns questionable. This paper provides evidence of the profitability of a simple and publicly available trading rule in five futures markets but more importantly incorporates the ability to reinvest any profits via the 'Optimal f' technique described by Vince (1990). The results indicate that money management in speculative futures trading plays a more important role in trading rule profitability than previously considered by providing dramatic differences in profitability depending on how aggressively the trader capitalizes each futures contract.

Original languageEnglish
Pages (from-to)1067-1073
Number of pages7
JournalApplied Financial Economics
Issue number15
Publication statusPublished - 15 Oct 2004
Externally publishedYes


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