Weekly Research Insights
Testing an Overnight Strategy in ES Futures | Trend Following and Capacity Constraints
Hi there. I discuss two topics in this week’s edition of Research Insights.
First, I revisit a paper published a few years ago that identified a significant overnight pattern in the ES futures contract. The authors proposed a simple trading strategy that delivered a Sharpe ratio of 1.2 after costs. I put their findings to the test using more recent data in an out-of-sample evaluation.
Second, I explore the topic of trend following and capacity constraints, drawing on recent research. Should managers expand into smaller, more exotic markets to boost capacity, and do these markets actually trend more?
