2014 AM Q9C

MrSmart

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Why would the return on a futures overlay strategy be different than a cash-market strategy? Besides rounding, transaction costs, and price inefficiencies.
I beat my head over it before reading the answer, can someone explain it using numbers?
 
Are you referring to basis risk here? Likely due to incorrect estimates for beta/duration.
Could also be that beta’s exhibited mean reversion to 1.
 
Yea, probably is. Don’t remember coming across this.
Thanks.
 
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