Do Momentum and Reversal Strategies Work in Commodity Futures? A Comprehensive Study PDF Download
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Author: Andrew Urquhart
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
This paper investigates the performance of three different trading strategies - Jegadeesh and Titman (1993), George and Hwang (2004) and Gatev, Goetzmann and Rouwenhorst (2006) - in 29 commodity futures from January 1979 to October 2017. We find there is no significant reversal profit across 189 formation-holding windows for all the three strategies. However, there are statistical and economically significant momentum profits, and the profitability increases with the rising of formation-holding periods. The strategy of inversing the conventional Gatev, Goetzmann and Rouwenhorst (2006) is more profitable than the other two momentum strategies on a risk-adjusted basis; but the superiority declines sharply since 1998. Momentum returns are quite sensitive to market conditions but the crash of momentum returns are partly predictable. Return seasonality, risk and herding also provide partial explanation of the momentum profits.
Author: Andrew Urquhart
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
This paper investigates the performance of three different trading strategies - Jegadeesh and Titman (1993), George and Hwang (2004) and Gatev, Goetzmann and Rouwenhorst (2006) - in 29 commodity futures from January 1979 to October 2017. We find there is no significant reversal profit across 189 formation-holding windows for all the three strategies. However, there are statistical and economically significant momentum profits, and the profitability increases with the rising of formation-holding periods. The strategy of inversing the conventional Gatev, Goetzmann and Rouwenhorst (2006) is more profitable than the other two momentum strategies on a risk-adjusted basis; but the superiority declines sharply since 1998. Momentum returns are quite sensitive to market conditions but the crash of momentum returns are partly predictable. Return seasonality, risk and herding also provide partial explanation of the momentum profits.
Author: Yurun Yang
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
This paper tests a wide range of momentum and reversal strategies at different trading frequencies for the complete Chinese commodity futures market dataset. Accurate estimates of transaction costs for each commodity and the minute level futures prices are utilized to obtain the most realistic out-of-sample backtesting results. Distinctively from the existing literature, our dataset does not suffer from liquidity problems since the intra-day data is constructed from the most actively traded contracts for each and every of the 31 commodities included in our sample. Overall, there are three main findings of this study. First, momentum and reversal trading strategies can generate robust and consistent returns over time; however, the intra-day strategies can not generate sufficiently high excess returns to cover the excessive costs due to the higher frequency of trading. Second, at lower trading frequencies and longer holding periods momentum and reversal strategies can generate excess returns, but with higher maximum drawdown risk. Finally, the double-sort strategies statistically improve the performance of the trading strategies.
Author: Joëlle Miffre
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The article tests for the presence of short-term continuation and long-term reversal in commodity futures prices. While contrarian strategies do not work, the article identifies 13 profitable momentum strategies that generate 9.38% average return a year. A closer analysis of the constituents of the long-short portfolios reveals that the momentum strategies buy backwardated contracts and sell contangoed contracts. The correlation between the momentum returns and the returns of traditional asset classes is also found to be low, making the commodity-based relative-strength portfolios excellent candidates for inclusion in well-diversified portfolios.
Author: Dan Calder
Publisher:
ISBN:
Category : Commodity futures
Languages : en
Pages :
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Book Description
The purpose of this paper is to expand the research on momentum strategies in the securities market. Specifically, it examines the momentum anomaly in respect to the commodity futures market, and closely follows recent work as studied by Miffre and Rallis (2007). This study identifies one statistically significant short term (1 to 12 months) momentum strategy yielding a return of 7.7% a year. This return is found to be substantially higher during specific periods of the sample. The strategy?s average abnormal gain caused by the continuation of returns is shown to be robust to the risk based explanations posited by many authors of the topic. Since the risk explanations do not hold for the momentum anomaly, the alternative explanation indicates towards market inefficiency. The results from this study indicate that market inefficiency is a plausible explanation for momentum profits as realised. Specifically, the abnormal profits seem to be a consequence of irrational investor behaviour, which tends to lead to an under-reaction to new market information.
Author: Stephen Satchell
Publisher: John Wiley & Sons
ISBN: 1119599326
Category : Business & Economics
Languages : en
Pages : 448
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Book Description
A one-of-a-kind reference guide covering the behavioral and statistical explanations for market momentum and the implementation of momentum trading strategies Market Momentum: Theory and Practice is a thorough, how-to reference guide for a full range of financial professionals and students. It examines the behavioral and statistical causes of market momentum while also exploring the practical side of implementing related strategies. The phenomenon of momentum in finance occurs when past high returns are followed by subsequent high returns, and past low returns are followed by subsequent low returns. Market Momentum provides a detailed introduction to the financial topic, while examining existing literature. Recent academic and practitioner research is included, offering a more up-to-date perspective. What type of book is Market Momentum and how does it serve a range of readers’ interests and needs? A holistic market momentum guide for industry professionals, asset managers, risk managers, firm managers, plus hedge fund and commodity trading advisors Advanced text to help graduate students in finance, economics, and mathematics further develop their funds management skills Useful resource for financial practitioners who want to implement momentum trading strategies Reference book providing behavioral and statistical explanations for market momentum Due to claims that the phenomenon of momentum goes against the Efficient Markets Hypothesis, behavioral economists have studied the topic in-depth. However, many books published on the subject are written to provide advice on how to make money. In contrast, Market Momentum offers a comprehensive approach to the topic, which makes it a valuable resource for both investment professionals and higher-level finance students. The contributors address momentum theory and practice, while also offering trading strategies that practitioners can study.
Author: Wilma de Groot
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
This study examines novel momentum strategies in commodities futures markets that incorporate term-structure information. We show that momentum strategies that invest in contracts on the futures curve with the largest expected roll-yield or the strongest momentum earn significantly higher risk-adjusted returns than a traditional momentum strategy, which only invests in the nearest contracts. Moreover, when incorporating conservative transaction costs we observe that our low-turnover momentum strategy more than doubles the net return compared to a traditional momentum strategy.
Author: Michael Beck
Publisher:
ISBN:
Category :
Languages : en
Pages : 140
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Book Description
Author: Jacob Bernstein
Publisher: McGraw-Hill Companies
ISBN: 9780071376778
Category : Aktiekurser
Languages : en
Pages : 0
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Book Description
After a discussion that defines market timing and market momentum, the author details the using of momentum to trade effectively. Using examples and illustrations to emphasize key points, he explores such issues as accumulation and distribution patterns and buy and sell signals based on momentum.
Author: Anouk Zwiehoff
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper investigates the profitability of a 52-Week High strategy first introduced by George and Hwang (2004) versus the profitability of 16 different momentum strategies applied to the 24 sub indices of the S&P Goldman Sachs Commodity Index. I build overlapping portfolios and find that the self-financing 52-Week High strategy - which is based on the ratio of an indices' current standing to its 52-week high - outperforms not only the average momentum strategy but also those four momentum strategies with a ranking period of 12 months which are assumed to offer the best possible comparability to the 52-Week High method. The general conclusions from this paper are fourfold. First, technical trading in commodities was profitable in the past, even after accounting for transaction costs. Second, I find that the 52-Week High method dominates the momentum strategies in commodity futures markets as it improves the forecasting power of the past for future returns. From a theoretical point of view, the results challenge the weak form of the Market Efficiency Hypothesis and from a practical point of view this thesis argues for the inclusion of commodity futures in conventional portfolios.
Author: Hoon Cho
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
This study examines time-series momentum in the Chinese commodity futures market. The findings show that a time-series momentum strategy performs best with a one-month look-back period and a one-month holding period. Furthermore, this strategy outperforms passive long and cross-sectional momentum strategies in the Chinese futures market based on Sharpe ratios, risk-adjusted excess returns, and cumulative returns. But highly volatile market characteristic with many speculative investors limits the period in which time-series momentum is maintained. Our findings suggest that the anomaly is observed in international asset markets, including Chinese commodity futures, and support the implication that speculators profit from time-series momentum strategy is the expense of hedgers.
