n recent years, technical trading in futures markets by large managed accounts I has increased dramatically. ' Irwin and Brorsen (1985) reported in this Journal that the equity of technically-managed public futures funds increased from $5.0 million to $3 15.2 million over the January 1978-March 1984 period. However, judging by the performance of public futures funds during the 1980s (Murphy, 1986;Elton, Gruber, and Rentzler, 1987), the returns to technical trading have been poor. The low returns in recent years may be due to increased use of trading systems. Another possibility is that commodity prices may have become more stable due to changes in macroeconomic policies.
In sum, technical trading system returns have varied widely over time (Irwin and Uhrig, 1984). Technical traders may benefit if they have a greater awareness concerning the factors associated with the wide variation in returns. In addition, analysis of the factors associated with trading system returns may yield new insights concerning the process generating futures price movements. The purpose of this note is to report research relating two factors-uncertainty and the relative size of technical system usage-to technical trading system returns.
Conceptual background and procedure is discussed in the next section. Results based on linear regression are then presented. The final section presents conclusions based on the regression results. 'Technical trading systems forecast price movements based an historical prices and/or volume and open interest.